The legality of bitcoin in India is still a grey area as there is no dedicated law to deal with the same. Different stakeholders have interpreted this vacuum differently. Bitcoin entrepreneurs believe that dealing in bitcoin in India is permissible whereas law enforcement agencies and statutory authorities have considered bitcoin as suspicious so far.
Legal authorities and lawyers are also divided on the fate and legal status of bitcoin in India. Some believe that use of bitcoin is legal in India whereas other have argued that use of bitcoin is illegal in India. Both arguments have their own weaknesses and strengths. However, neither legal argument has brought the true picture so far.
We at Perry4Law Law Firm have tried to bring some certainty in this uncertain environment. We believe that bitcoin use, websites and businesses can be legal in India if they comply with techno legal compliances as prescribed by different laws of India. Anything short of this techno legal compliance on the part of bitcoin community would mean a criminal prosecution. Unfortunately, bitcoin stakeholders in India are not at all aware of techno legal compliances.
A cursory analysis of some of the known bitcoin websites in India proved this point. The bitcoin websites have miserably failed to comply with techno legal requirements of Information Technology Act, 2000 and the rules prescribed under the same. Other Indian laws, especially those pertaining to foreign exchange and taxation, are also not complied with by these websites.
The position maintained by us is applicable so long there is no dedicated law governing use of bitcoin in India. The moment such a law is formulated, the legality of bitcoin and their use must be analysed keeping in mind the specific provisions of such law. However, there is very dim possibility that the Reserve Bank of India (RBI) and Indian government would undertake a legislative exercise to regulate bitcoin in India in the near future.
Naturally, the only choice before the bitcoin community is to comply with techno legal compliances. At the same time it is imperative on the part of law enforcement agencies, regulatory authorities and Indian government to ascertain whether bitcoin have been used for anti national and illegal purposes or not.
Perry4Law recommends that a committee must be established by RBI and central government to analyse the business model and commercial activities of bitcoin websites in India. Those found to be complying with existing Indian laws must be encouraged and those violating the same must be punished. However, the approach of keeping the eyes closed is no more appropriate for RBI and central government.