Even as India's community of cryptocurrency is awaiting the report or recommendations of the inter-disciplinary committee constituted by the finance ministry in April, RBI Governor Urjit Patel reminded the parliamentary standing committee on finance on Wednesday that the committee was apprised of concerns over transactions involving such currencies as bitcoin.
This was Patel's response to the concerns of members about increasing transactions using different cryptocurrencies, and their questions on whether it was legal. The RBI governor did not give a direct answer on whether it was legal, but merely said the central bank was keeping close tab on such transactions.
The inter-disciplinary committee is mandated to examine the framework on virtual currencies, and its report was expected to be announced end of this month. RBI sources could not confirm whether the report will indeed be ready by then. The members include officials from ministries of finance, information and technology, NITI Aayog and the RBI.
Minister of State for Finance and Corporate Affairs Arjun Ram Meghwal had said in a written reply to the Rajya Sabha on March 28 that the RBI does not authorise virtual currencies like bitcoin as its usage could lead to money laundering.
“The absence of counter parties in usage of virtual currencies, including bitcoin, for illicit and illegal activities in anonymous/pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism laws. No regulatory approval, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities”, the minister said in his written reply.
The statement sent waves of shock and concern among India's cryptocurrency community of unknown strength, making Jaideep Raddy, lawyer for digital asset and blockchain foundation of India—an association of people interested use of digital assets like bitcoins—assuage the concerns. Reddy's interpretation was that people had misread Meghwal's statement, and that the minister was not talking against the use of bitcoins, but only the usage that may be illegal.
More importantly, Reddy told the fans of virtual currency that “It is not likely that the government, in promoting technology, innovation and financial inclusion, will resort to a knee jerk ban of bitcoin as such. No major economy has done this. However, if there is a ban, all parties will have to comply with the same, subject to their remedies under law”.
Security apart, the RBI's concern over the use of cryptocurrency is said to be its highly volatile value, something former RBI governor Raghuram Rajan had said was not good for a currency.
India accounted for 10 per cent of the global cryptocurrency trade in May, according to indiabitcoin.com.
