With the market capitalisation of Bitcoins and other cryptocurrencies crossing $120 billion – only six Indian states have a state GDP more than that – virtual currencies look well on their way to become the de facto currency of the digital age.
But it is an unknown devil for most countries and their administrations. Their acceptance and legality is still a grey area in most jurisdictions, some of which have even gone to the extent of banning them.
Three Indians are determined to clear the air around cryptocurrencies in India.
On November 13, a public interest litigation (PIL) petition filed by Dwaipayan Bhowmick seeking the regulation of Bitcoin and other cryptocurrencies in India came up for hearing in the Supreme Court (SC). Tagged with Bhowmick’s hearing was another PIL filed by Siddharth Dalmia and Vijay Pal Dalmia seeking the restraining of sale and purchase of cryptocurrencies in India.
A three-judge SC bench of Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandrachud issued notices to the Central Government, Reserve Bank of India (RBI), Income Tax Department, Enforcement Directorate, Securities and Exchange Board of India (SEBI), the Ministry of Electronics and Information Technology (MeitY), and the Ministry of Law and Justice. They are to respond within four weeks.
“I want bitcoin to be regularised in India, just like US and Japan. That is the reason I have filed it (the PIL). Bitcoin has got a very good prospect,” Bhowmick, 33 years and an advocate himself, told FactorDaily. It is legal to use Bitcoin in the United States, Japan and some other countries for payments at accepted locations. These transactions are also usually subject to taxation and other regulations.
In India, the legality and regulation around Bitcoin is a grey area with very less clarity from the government or the regulatory bodies. In December 2013, the RBI had put out its first notice on virtual currencies cautioning users about the financial, operational and legal risks involved in dealing with virtual currencies. This warning was re-published in February 2017. SEBI has also recently formed a committee on financial and regulatory technologies (CFRT) to take a look at financial technologies including Bitcoins and cryptocurrencies. The market regulator also intends to bring about a regulatory framework on cryptocurrencies. But it is yet not clear whether cryptocurrencies will come under the RBI’s or SEBI’s purview.
Meanwhile, cryptocurrency adoption has been so fast in India that cryptocurrency exchanges in the country were adding over 2,500 new users every day in June.Earlier this year, New York bitcoin trade analyst Chris Burniske had also tweeted about how trade in Indian rupees accounted for over 10% of the global Bitcoin trade volume.
Bhowmick says he stumbled upon Bitcoins while he was looking for an avenue to make some investments in. Also, he had heard about Bitcoin and other cryptocurrencies from his friends.
“I decided to check more on Bitcoins and soon realised that even if I’m investing in Bitcoins it is not yet regulated in India and legalised in India. So even if I invest, for which Bitcoin is a very good, it can be counted as illegal or something,” says Bhowmick.
The PIL filed by Bhowmick also cited the lack of a regulatory framework for cryptocurrencies in India, it being completely untraceable and the possibility of being used for trading and various other financial activities. “As a petitioner, I would like to see the government is regulating Bitcoin,” he adds.
The other two petitioners are the father-son Dalmia duo. Siddharth Dalmia was introduced to cryptocurrencies while working on a project during his engineering college days. He and his father, Vijay Pal Dalmia, a corporate lawyer and partner at New Delhi law firm Vaish Associates, often argued about its underlying technology.
Siddharth says he wanted to step into Bitcoins. “I wanted to but my father was always against it. So I never got into cryptocurrencies,” he says.
The WannaCry ransomware attack of May 2017, where the hackers asked victims to pay up in Bitcoins, made him change his stance regarding cryptocurrencies.
The duo filed its first petition in June 2017 that came up for hearing in the SC the following month. The petition seeking a restraint on the sale and purchase of cryptocurrencies in India was disposed of by a bench of then Chief Justice J S Khehar and Justice Chandrachud. But, the court asked the RBI to look into the complaint and respond accordingly.
The central bank responded that it had warned people against the usage and risks associated with virtual currencies. But the Dalmias were not happy with it. Their new petition points to the inadequate action by RBI as one of the reasons they have approached the apex court a second time.
“I wanted blockchain technology to progress and my dad felt that cryptocurrencies, which work on blockchain technology, would lead to things like money laundering and other financial crimes,” says Siddharth, 23 years and a student of law from Jindal Global Law School.
He has now aligned with his father’s view and feels that cryptocurrencies shouldn’t be given a free hand in India. “In India, they should come up with a ban, at least for a limited period of time after which maybe they can regulate it. But, right now, because of the problem that our economy faces, the government should come up with really stringent regulations,” says Siddharth.
Benjamin Lawsky, the former New York Superintendent of Financial Services, brought cryptocurrency companies under the ambit of the BitLicense policy leading to ‘The Great Bitcoin Exodus‘ with several companies stopping cryptocurrency operations in New York
He takes the example of Benjamin Lawsky, the former New York Superintendent of Financial Services, who brought the licensing of cryptocurrency companies in the state under a BitLicense policy. This had led to what New York Business Journal called ‘The Great Bitcoin Exodus‘ resulting in several companies stopping cryptocurrency operations in New York.
“He (Benjamin Lawsky) came up with it (BitLicense) because these currencies have been used to buy drugs, to engage in other illegal activities and are a de-facto currency for many dark web websites,” says Siddharth.
“Right now if someone takes part in such illegal activities and then goes off the grid, there is no law to tackle them. If the government comes up with regulations regarding the use of cryptocurrencies then the government agencies will have some procedural backing to prosecute people who are evading taxes and involved in dark web activities,” he says.
The petitions will now come up for hearing in the first week of January 2018.