Multiple agencies, including the Income Tax (I-T) Department, police and the Enforcement Directorate (ED), have launched a crackdown against traders across the country dealing in Bitcoins, a cryptocurrency payment system which works without a Central bank or single administrator. Bitcoin traders are being booked under sections of the Foreign Exchange Management Act (FEMA) and the Indian Penal Code.According to cyber experts, trade in Bitcoin is rising day by day, but the government has not come forward with any regulatory norms. Cases of cheating and violation of FEMA are being registered against Bitcoin traders. Pawan Duggal, a noted cyber expert, told The Sunday Guardian: “There are no clear laws stating whether the trade in Bitcoin is illegal or authorised in the country. The Bitcoin system works as a monetary system without having any links to the Central banks of any countries. The ability to make payments worldwide is enabling Bitcoin traders to violate FEMA laws.” “By nature, trade in Bitcoin is contradictory to FEMA and I-T laws, but at present, even the RBI has issued only a risk advisory attached to cryptocurrency trade and it has not prohibited Bitcoin trade,” Duggal added.
The RBI has issued three notifications pertaining to Bitcoin and in all these, starting December 2013, the RBI has cautioned users, holders and traders on the risk of these currencies and clarified that it has not given any licence or authorisation to any entity or company to operate such schemes or deals.
“After repeated risk advisories by RBI, in April 2017, the government set up an inter-disciplinary committee—chaired by Special Secretary (Economic Affairs)—to examine the existing framework of virtual currencies. It was supposed to submit its report within three months, but till now nothing has happened in this regard,” Duggal added.
Last week, the I-T Department surveyed major Bitcoin exchanges across the country. The I-T Department is set to issue notices to about 500,000 high net-worth individuals trading on these exchanges. Manoj Sinha, a Delhi-based senior lawyer and cyber law expert, told The Sunday Guardian: “Bitcoin might turn into ‘e-ponzi’ or an electronic version of investor fraud in the country. The inaction of the government in this regard is sad. I-T is carrying out raids on Bitcoin exchanges without sometimes following the standard procedure of operation. Bitcoin trade is not registered as a business activity and thus the jurisdiction of the I-T department is quite confusing.”
Sanjay Munjal, owner of an online Bitcoin exchange, told The Sunday Guardian. “I have only a few customers and before trading in Bitcoin, I ask them to give in written that if they lose their money, they will not go to police. The system of Bitcoin works like the stock market and there is risk involved in this business and after losing money, people approach the police.”
Meanwhile, in view of the rising number of Bitcoin traders, the Securities and Exchange Board of India on 20 December said that if Bitcoin is considered as a commodity derivative, then SEBI might regulate it.