New Delhi: The Supreme Court on Tuesday, November 14, admitted a petition seeking the regulation of Bitcoin and other cryptocurrencies in India. The 43-page petition filed by advocate Dwaipayan Bhowmick seeking directions to control the flow of Bitcoin contended that “Lack of any concrete mechanism pending the regulatory framework, has left a lot of vaccum and which has resulted in total unaccountability and unregulated Bitcoin (crypto money) trading and transactions”
The Supreme Court issued notices to the ministries of Finance, Law and Justice, Information Technology, market regulator SEBI and the RBI, on the plea which also sought setting up of a panel to frame a mechanism to regulate the flow of Bitcoin.
The three-judge bench overseeing the case comprised of Chief Justice Dipak Misra, Justices A.M. Khanwilkar and D.Y. Chandrachud.
Earlier, in 2013, the RBI had issued a warning to make consumers aware about the threats posed by the use of Digital currencies.
Following which in February, 2017, the government announced an Inter-Disciplinary “Virtual Currency Committee” chaired by Special Secretary (Economic Affairs) and representatives from Department of Economic Affairs, Department of Financial Services, Department of Revenue (CBDT), Ministry of Home Affairs, Ministry of Electronics and Information Technology, Reserve Bank of India (RBI), State Bank of India (SBI) and NITI Aayog.
The petition by Bhowmick, seeking to end the ambiguity, claimed that despite the RBI’s call to caution people against the use of virtual currencies, domestic Bitcoin exchanges have been adding over 2,500 users a day and that over 5 lakh residents now hold bitcoin.
The rate of exchange of one Bitcoin is Rs 5.04 lakhs at the time of publishing.
While banning the Bitcoin and other cryptocurrencies was also discussed at a meeting of the Inter-Disciplinary Committee last month, it was decided by majority that these must be regulated instead.
Thereby making it accountable to the exchequer and liable to the levy of the Goods and Services Tax (GST) on their sale.
According to tech experts, the encrypted-yet-public nature of Bitcoin makes it difficult to prohibit.
“You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust. World governments will have to readjust,” predicted John McAfee, founder of McAfee.
PayPal co-founder Peter Thiel said, “I do think Bitcoin is the first [encrypted money] that has the potential to do something like change the world.”
India however is not the only Country to face the dilemmas of regulating the trade of Bitcoin. US regulators are presently debating whether Bitcoin is a currency or a commodity.
The petition by Bhowmick also states that “The Chinese government has banned the issuance of new digital coins for fundraising, also known as initial coin offerings, and the Russian courts pronouncing the transfer of cryptocurrency into Roubles as illegal further highlights the importance of issue whether in India Bitcoin be allowed or not.”
A Miami Judge in 2016 ruled that Bitcoin is not “Money” and cannot be considered a financial instrument. He also stated that its use or sale unintentionally for illegal purposes does not constitute money laundering
In 2013, former US Vice President Al Gore said, “I think the fact that within the Bitcoin universe an algorithm replaces the functions of [the government] … is actually pretty cool.”
An article published on bitcoin.com, criticised the petition by Bhowmik, claiming that certain false assertions such as, terming Bitcoin to be “completely untraceable” have been made and accused the Indian news sources of tabloid journalism. Bitcoin.com also questioned as to how the government intended to accomplish regulation of “the flow of bitcoin” and that what it means is something of a mystery, and directs towards a fundamental problem that the regulators might not understand Bitcoin.
WikiLeaks founder Julian Assange addressed the security implications of Bitcoin in a secret conversation with Google CEO Eric Schmidt and Jared Cohen, a former Secretary of State advisor to Hillary Clinton, in 2013, stating that Bitcoin has “no central nodes. It is all point to point. One does not need to trust any central mint.”
The petition by Bhowmik also said that Bitcoin was not tied to any bank or government and allowed the users to spend money anonymously.
This is consistent with the RBI’s statement from 2013, which states that Bitcoin as a medium of payment is not authorised by any central bank or monetary authority, therefore the absence of information of counterparties in such peer-to-peer anonymous/ pseudonymous systems could subject the users to unintentional breaches of laws governing money laundering and the finance of terrorism.
The petition urges the Supreme Court to:
- Issue urgent directions of appropriate nature so as to direct the respondents to regulate flow of Bitcoin and to ensure that the same be made accountable to exchequer.
- Constitute a committee for framing of appropriate mechanism to regulate flow of Bitcoin and ensure that same be made accountable to exchequer.
- Constitute a committee of experts to consider the prohibition/regulation of Bitcoin and other crypto-currencies.