Digital cryptocurrency, Bitcoin has been in turmoil in India ever since the monetary regulator of India, Reserve Bank of India (RBI) issued an advisory stating that it shall not be regulating the currency. Close on the heels of the advisory, came the raids by Enforcement Directorate (ED) at the offices of Buysellbit.co.in and RBItco, under the charges of violation of Foreign Exchange Management Act (FEMA). With no clarity on the legalities of Bitcoin in India, most operators have suspended services, and are awaiting guidelines and regulation for the currency soon.
While Indian Bitcoin operators have formed Bitcoin Alliance of India; no major steps have been seen taken in the direction of a solution by the body.
In the wake of impending decision from RBI, eye of Enforcement Directorate and Income Tax department on Bitcoin operators and lack of basic guidelines over the currency in India, e27 decided to chat with Mahin Gupta, CEO, Buysellbitco.in, one of the oldest Bitcoin operators in India. Excerpts:
First the RBI advisory, then the ED and IT department going after different Bitcoin dealers almost at the same time, do you think this is the government’s way of discouraging the currency in India?
Well, Bitcoin is a very new concept and even authorities need some time to understand it. Regulations and laws cannot be created in one day. They will have to understand Bitcoin’s effects in the Indian environment from various points. I personally believe that the Indian authorities have reacted at good time as Bitcoin adoption is still in a very early phase. It will be good if the outcome of recent events forms a clearer legal framework for Bitcoin in India.
And frankly speaking, in my personal opinion, if they want to discourage usage of Bitcoin in India, I will not use it. The real issue is that banning Bitcoin will lead its usage to grey domains only, as technically it is very hard to stop usage of Bitcoin.
How have the recent activities affected your clients?
The major issue is that since we have suspended operations and so have other businesses in India, clients do not have any trusted and reliable places to buy or sell Bitcoin. Also, most of them are confused at this point whether they should do any more transaction with Bitcoin or not.
Have there been any major losses to clients who were dealing in Bitcoins?
Bitcoin is very volatile with its prices, and it should not be used as an investment option by general people. India is still in a very early phase of Bitcoin adoption and its market share in Bitcoin economy is trivial; so obviously, the recent events have had almost no effect on Bitcoin pricing. But now they do not have any place in India to liquidate their holding, which is a major challenge. As far as our clients are concerned, we stopped buy-sell operations the very next business day after RBI circular (before ED search) and all orders were honoured.
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What are you doing to regain their trust?
We still have our support channels open for our clients and we are answering their questions. Unfortunately, we cannot resume operations until we get a clear legal framework to trade Bitcoins.
What are your views on the guidelines issued by RBI?
RBI guidelines are a welcome move. It at the very least means that RBI and related agencies are studying the Bitcoin effects in accordance to the Indian economy.
Are you looking at having a conversation with the government or RBI to deal with the situation? Is this the end of Bitcoins in India?
In USA and other countries, there is lot of communication going in between Bitcoin communities and government authorities currently. For example, Gavin, the lead developer of Bitcoin will meet Council on Foreign Relations (CFR) in early February; French senate has held hearing on Bitcoin; The New York State Department of Financial Services (NYDFS) will hold public hearings on the regulation of digital currencies on January 28 and 29. We will surely talk to authorities if they want to hear from us.
The Bitcoin community is also actively communicating with authorities at various levels. Personally, I don’t think this is the end of Bitcoin in India, maybe it is a start of its regulated, which should be seen as a very warm welcome.
With RBI not regulating Bitcoin, what is its future in India?
Without regulation and proper legal framework, Bitcoin industry in India cannot go mainstream. I am sure at one point of time in the future, RBI will regulate it.
Please shed light on what kind of communication is the Bitcoin community having with the government.
Businesses who wanted to invest in Bitcoin are communicating with authorities about legal aspects of this business.
ED was of the view that the raided websites were violating FEMA. What are your thoughts on it? How will you change your proceedings so as to honour FEMA guidelines?
Well, I am not an expert on the legal side of FEMA. If ED and RBI think that Bitcoin should be regulated under FEMA and issues such guidelines, we will surely apply for required registrations and licenses.
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What was the rationale behind Bitcoin Alliance of India? Has it been able to serve its purpose?
Coinmonk and some other partners have come up with Bitcoin Alliance of India and it is good thing. Bitcoin is still a very new concept and a complicated one too. Bitcoin community needs to educate people more about Bitcoin and crypto currencies in general. There are lots of meetups going on in metro cities in India where people can learn more about Bitcoin.
Why aren’t you a part of Bitcoin Alliance of India?
As of now, I am not part of Bitcoin Alliance of India as I am busy with recent events.
Income Tax department is also considering taxing Bitcoin websites. Is this a right measure? Do you think it will help give Bitcoin a legal identity in the country?
If any instrument is generating income, it has to be taxed. Along with its regulatory confusion, one of major concerns with Bitcoin is taxation. It will be great if the Income Tax department issues guidelines on taxation of Bitcoin transactions.