Topic: Is it legal to receive Bitcoins from Foreign countries? - page 2. (Read 1627 times)

RBI has the power to include Bitcoins within the definition of currency. Kindly have a look at the part II of this series. But given it's peer to peer nature & no backing by any institution/agency, it is highly unlikely that Government will consider it as currency. I think they will consider only the 'Lakshmi coin' (the one which RBI is going to issue as a digital alternative of the Indian Rupee & will be backed by them) as currency. And as far as I know, Bitcoin is considered as currency in Japan.

                                                                           PART II

                        IS BITCOIN A CURRENCY?

‘Currency’ has been defined under FEMA to include, ‘all currency notes, postal notes, postal orders, money orders, cheques, drafts, travelers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank’.

The question at hand is whether a ‘virtual currency’ such as Bitcoin can be said to come under the purview of the definition of currency above. The answer to this question can be found in the maxim ‘express um facit cessare tacitum’. The maxim represents the principle ‘when there is express mention of certain things, then anything not mentioned is excluded’. The maxim has been recognized by Indian courts and was also relied upon by the Supreme Court in Shankara Rao Badam & Ors. v. State of Mysore & Anr and Union of India & Anr. v. Tulsiram Patel. In light of the provisions of the law, it can be reasonably concluded that ‘virtual currency’ should be considered excluded from the definition of currency. While it may be argued that it may fall under ‘such other similar instruments’ under Section 2(h), but such ‘other instruments’ need to be specifically notified by the RBI which is not the case. There is no such declaration in respect of cryptocurrencies in general or Bitcoin in particular. Moreover it is clear that Bitcoin is not really similar to any of the instruments mentioned in the definition, not least because none of them are digital or virtual in nature.Therefore, under the provisions of existing law, Bitcoins are not currency.

It is notable here that this is an inclusive definition which means that it has a large scope for expansion. The legislature has consciously made the definition capable of further expansion by making it inclusive and also by giving the Reserve Bank of India (“RBI”) the authority to notify other similar instruments.

VC's have not been recognized by the Reserve Bank of India ("RBI"), as a 'currency' in India. But as per the definition of currency, RBI does have the power to include VCs within 'currency'. According to Na Vijayashankar, founder of Naavi.org, since Bitcoin does not carry any promise from any Government agency, it is impossible for RBI to declare it as a “Currency”.

On May 3, 2000 the RBI notified “debit cards, ATM cards or any other instrument that can be used to create a financial liability” as “currency” under the FEMA (by Notification No. FEMA 15/2000/RB dated May 3, 2001). Since Bitcoin is not really backed by any institution and has no backing by any central bank or institution and because most of the transactions involving acceptance of Bitcoin are voluntary in nature, therefore it does not seem that Bitcoin is an instrument that can be used to create a financial liability & hence it can not be termed as currency. This can be explained further with the help of two examples:

(i) If a person owns Indian rupee notes worth Rs. 500 and everyone stops accepting the currency then he can go to the Governor of RBI and claim Rs. 500 from him, however if I own Bitcoins then whether my Bitcoins can be used to buy any goods or services is entirely dependant upon the willingness of third parties to accept Bitcoin as a valuable item.

(ii) If I order a pair of shoes worth Rs. 500 from flipkart.com and pay for those shoes using Indian currency, then it does not matter if flipkart decides to not accept Indian currency (whether by means of cash, credit card, cheque, etc.) and accepts payment only in Bitcoins. As soon as I give flipkart currency notes or coins worth Rs. 500, my legal obligation to pay for the shoes is fulfilled. On the other hand if I pay for those shoes with Bitcoins then unless flipkart voluntarily accepts payment in Bitcoin, my liability to pay for the shoes will still legally exist till I pay flipkart Rs. 500 in Indian currency.

Now we will have a look at whether Bitcoin can be termed as a domestic currency, foreign currency or private currency:

                        (A) INDIAN CURRENCY

Definition of ‘Indian Currency’ under FEMA states that Indian currency is the currency which is expressed or drawn in Indian Rupees. Since Bitcoins are neither expressed nor drawn in INR, it isn't Indian currency.

                        (B) FOREIGN CURRENCY

The RBI Act does not specifically define currency, but it does define foreign currency to have the same meaning as in Foreign Exchange Regulation Act, 1973, which has since been replaced by FEMA. FEMA defines ‘foreign currency’ as any currency other than Indian currency. As defined above ‘Indian Currency’ under FEMA states that Indian currency is the currency which is expressed or drawn in Indian Rupees.

According to Na Vijayashankar, founder of naavi.org, Bitcoin cannot be considered as a “Foreign” currency since there is no “Cyber Nation” recognized in Indian law and also since Bitcoins can also be produced locally in India itself. To recognize Bitcoin as a “Foreign Currency” and apply laws applicable to foreign currency, there is a need first to declare “Cyber Space” as a “Nation” and “Virtual Currency” as the “Currency of the Cyber Nation”.
   
I disagree with Na Vijayashankar here. As FEMA defines 'Foreign currency' as "any currency" other than Indian currency, there is no need to declare cyber space as a nation & virtual currency as it's currency to consider Bitcoin as a foreign currency. Moreover whether Bitcoins are produced in India or in any foreign country also doesn't matter as long as it falls under the ambit of "any currency other than Indian currency" to define it as a 'foreign currency'.

                        (C) PRIVATE CURRENCY

According to Na Vijayashankar, the Bitcoin users consider it as a “Private Currency” and are willing to exchange goods and services though there is no monetary backing by any authority guaranteeing a value for the bitcoin. This is being done at their own free will and not at the compulsion of any authority. Use of any asset as a “Private Currency” is not a concern of the authorities except when there is “Cheating” through “Misrepresentation” that “The private currency is a fiat currency”. Unless such an allegation can be sustained in a Court of law, neither RBI nor ED can take objection to the “Private Currency”.

I partially agree with NaVi here. One has the right to exchange goods & services for whatever they are willing to. It is their own will. But while doing so one must not violate the existing laws of the country. As in the case of Bitcoins, there are possibilities of the users violating some of the existing laws (as warned by RBI in it's advisory).

      Therefore it is clear that Bitcoins do not fit into the plain vanilla definition of currency under Indian law. However this does not mean that the RBI cannot regulate Bitcoins or transactions involving Bitcoins. The RBI can very well notify Bitcoins as “Indian currency” and then come out with rules and regulations for Bitcoin transactions. Cynics may argue that this is not possible due to the peer to peer nature of Bitcoins and the Bitcoin network and they would be right to the extent that it may not be physically feasible for the RBI to regulate every Bitcoin transaction, but it would be possible for them to target Bitcoin exchanges which is the entry point for most users of Bitcoin.

But now the question remains whether Bitcoin can be considered as foreign/private currency or not? I would like to have your opinion/guidance on it.
 
                        
                        IS IT A LEGAL TENDER?

Although there is no definition for legal tender under Indian law, the power to issue bank notes vests exclusively with the Reserve Bank of India (“RBI”). The bank note issued by RBI is considered legal tender (S. 26 of RBI Act). For any instrument to qualify as a legal tender it must fulfill the test prescribed in Section 13 of the Coinage Act which states that coins issued under the authority of Section 6 of the Coinage Act, shall be legal tender in payment or on account i.e. provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed. Over a period of time various instruments have been defined to mean legal tender, such as One Rupee issued under Currency Ordinance, 1940 as well as bank notes issued by RBI under the RBI Act. From the above, it could be argued that so far as Bitcoins are not specifically designated by the government to be legal tender, they should not fall within this category.

                        
                        IS IT A CURRENCY NOTE?

The term currency notes are specifically defined in Section 2(i) of FEMA to mean and include cash in the form of coins and bank notes. This definition therefore does not cover Bitcoins which are not issued either under the Coinage Act or RBI Act. S. 22 of the RBI Act provides that RBI has the sole right to issue bank notes and S. 26 provides that bank notes shall be legal tender in India.
   
   From the above it appears that while Bitcoin has several features of a currency, it is not bank notes and is consequently not legal tender in India.

We will have a look at whether Bitcoin can be considered as 'Security or Derivative' under the current legal regime in India, in next part.

A person may come across the need to purchase them through Fiat Currencies (INR, USD, GBP, etc). Purchasing any e-currency and loading to an eWallet is regulated by the RBI. Although Bitcoin is in no way related to this, I wanted to see how close I could get to any laws that could present a roadblock.

And that's one of the reason why governments hate.

Still there is no law for the regulation of crypto currency in India. Even no one can track you, how much bitcoin you have, since you can create a private bitcoin wallet to receive your bitcoin. It is the untraceable asset. 

Bitcoin can not be and will never be considered as 'currency' under any law anywhere on earth. Currency has to be issued by a state. On the contrary, Bitcoin is already considered as a legitimate medium of exchange in Japan and a legitimate asset class in US and parts of EU.

Hi everyone! Since last few days I have been doing research on whether it is legal or not to either buy or accept Bitcoins as payment for goods exported or services rendered abroad, from an individual/company located outside India.

As usually INR rates to buy Bitcoins are way higher than USD, GBP, EUR etc rates, there exists a great arbitrage opportunity (Though since last few days exactly opposite of this is happening. Might be because of demand being lesser than supply nowadays).

I studied several research papers & articles like Nishith Desai's "Bitcoins - A Global Perspective", New Delhi based lexcounsel law firm's paper titled as "Legal Status Of Virtual Currencies/Cryptocurrencies In India", a few articles on Praveen Dalal's perry4law.co.in & Na Vijayashankar's Naavi.org, Mr. Vipul Kharbanda's paper on cis-india.org titled as "Can Bitcoin Be Banned by the Indian Government?" etc. & a few news articles.
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                        DISCLAIMER

I will post my research over here in parts. The credit for these posts goes to the authors/content writers of the above mentioned papers & articles. These posts are for informative/educational purposes only & should not be considered as legal advice. I shall not be liable for any action taken by anyone based on the information provided through these posts.
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NOTE : Will highly appreciate if you correct me if I go wrong somewhere or advice/guide me on this topic.
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IS IT LEGAL TO RECEIVE BITCOINS FROM AN INDIVIDUAL/COMPANY LOCATED OUTSIDE INDIA?

                        PART I


In order to decide whether it is legal or not to either buy or accept Bitcoins as payment for goods exported or services rendered abroad, from an individual/company located outside India, we need to examine the legal basis and treatment of Bitcoin under the current legal and regulatory regime in India. We need to explore whether Indian laws and regulations as they stand today would even consider Bitcoin as ‘currency’ and which regulations would govern such kind of Bitcoin transactions. We shall first give a brief description of Bitcoin and then move on to what its legal treatment would most likely be which would then lead us to examine which regulations would most likely apply to various Bitcoin transactions.

With the very basic and brief understanding of Bitcoin, we shall try to examine whether Bitcoins should be treated under Indian law as:

(1) Currency,
   A] Domestic currecy
   B] Foreign currency
   C] Private currency
(2) Security or Derivative,
(3) Prepaid payment instrument,
(4) Negotiable instrument
(5) Computer or Computer program
(6) Property,
(7) Goods,
( Commodity.

We will have a look at whether Bitcoin can be considered as 'currency' under the current legal regime in India, in next part.