- India’s central bank explained its position on virtual currencies to the Supreme Court.
- The effective legislation does not cover transactions with digital coins.
India has joined the ranks of the countries that do not consider cryptocurrencies a legal tender. In its counter affidavit, India’s monetary regulator (RBI) explained that digital currency could not be regarded as a valid payment system under the existing legal regime due to its peer-to-peer nature.
“It is submitted that crypto-currencies fall short of being true currencies. It is further submitted that RBI does not consider virtual currencies such as Bitcoins as ‘currency’ under the existing laws. There are no enabling provisions under the current law to treat Bitcoin as a currency,” stated the affidavit, filed by the Assistant General Manager of the RBI.
The regulator cited a few reasons, why the effective legislation does not allow to consider virtual coins as valid money: they do not have physical form and are not issued by the central bank and not covered by the pertinent legal provisions. Meanwhile, the instrument can be regarded as a valid currency only if it has the identical or similar characteristics of the instruments equated to money.
“Thus, legally it may not be possible to notify Bitcoins as currency for FEMA…Since Bitcoins and other VCs are not in the physical form and neither expressed or drawn in Indian rupees, the definition of ‘Indian currency’ cannot be made applicable to Bitcoins,” said the affidavit.
Since virtual currencies are not defined as money, transactions with these instruments are not covered by The Payment and Settlement System Act, RBI admitted. While failing to declare cryptocurrencies either legal or illegal, RBI explained, that legalizing virtual currencies will influence roles and responsibilities of other regulatory authorities and enforcement agencies.
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