Bitcoin dealers and traders in India have taken Indian laws for granted for too long. Initially they presumed that there is no law that prohibits the unregulated dealing in Bitcoins in India. However, the moment Reserve Bank of India (RBI) declared that use of Bitcoins in India is subject to Indian laws and is legally risky, most of the Bitcoin websites closed their shops.
RBI has just reiterated what has been suggested by Perry4Law, the leading techno legal law firm of Asia. According to Perry4Law, Bitcoins website owners and entrepreneurs must comply with Indian laws to stay legal. Even RBI has clearly mentioned that there have been several media reports of the usage of VCs, including Bitcoins, for illicit and illegal activities in several jurisdictions.
Soon after the cautious advisory, the enforcement directorate (ED) swung into action and raided two Bitcoins websites and their offices. ED believes that Bitcoins money can be used for hawala transactions and funding terror operations and this seems to be a legally plausible explanation as well.
Now it has been reported by Hindu that a small section of tea traders and exporters have bee using Bitcoins to bypass Indian laws and to deprive Indian exchequer of the revenue it is legally entitled. The price this kind of shipment fetches is fantastic, around $11 per 15 gm of tea. Any consignment of up to 4 kg, if sent out of India by an international courier, will attract no mandatory surveillance or monitoring.
The attention of the Commerce Ministry and Tea Board has also been drawn to this section of small and specialised tea growers and exporters who have been opting for US-based online trading platforms to use digital currency Bitcoin as a means of expanding their international business. This way they are bypassing the normal banking channels and they cannot be regulated and scrutinised by Indian authorities.
The Bitcoin instrument helps the exporter and the importer of tea clinch a deal directly without any middleman, thus cutting out the middleman’s fees. The transaction can be completed within a few minutes and weekly holidays, bank holidays or strikes do not stand in the way of concluding the deal. Also, payments can be received from anywhere in the world without any bank transfer or the use of debit or credit cards.
In the winter session, several Members of Parliament raised questions about the use of the Bitcoin instrument by a section of small and specialised tea growers to sell their produce abroad. They wanted to know if the Government was aware of such practices, and if so, was it contemplating any action.
However, the stand of Indian government in this regard is still not clear. This has not only given rise to legal uncertainty but has also encouraged illegal and unauthorised use of Bitcoins in India. The Information Technology Act 2000, which is the cyber law of India, prescribes cyber law due diligence and the Internet intermediary liability in India. These cyber laws due diligence and Internet Intermediary requirements squarely apply to websites dealing, selling and transferring Bitcoins in India. Further, money laundering, foreign exchange and security dealing laws also apply to Bitcoins dealings and trading in India.
The cyber law trends of India 2013 by ICT law firm Perry4Law has cautioned (PDF) that Bitcoins websites may further face legal actions if they fail to comply with Indian laws in the year 2014. Taking preventive measures by the Bitcoin community of India would be a sane choice as the present regulatory requirements of India are not followed by the Indian Bitcoin community. Let us hope that the Bitcoins saga in India would not end up in the prosecution of Bitcoins entrepreneurs in India.