Reserve Bank of India Doesn’t Recognize Bitcoin As A Form Of Money Or Currency

The Reserve Bank of India (RBI) has told the country's Supreme Court that Bitcoin and other cryptocurrencies should not be considered as a form of money or currency.

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The Reserve Bank of India (RBI) has told the country’s Supreme Court that Bitcoin and other cryptocurrencies should not be considered as a form of money or currency.

The RBI’s stance was part of its counter affidavit as it responded to a number of petitions launched at the top court by crypto exchanges.

It also noted that virtual currencies basically involve peer-to-peer transactions and do not involve service providers. As a result, these crypto assets do not even qualify to be recognized as a payment system.

In the affidavit filed by RBI’s Assistant General Manager, India’s top bank told the court that cryptocurrencies are not true currencies under the existing laws of the country.

 The documents further note that:

“There are no enabling provisions under the extant law to treat Bitcoin as a currency.”

The top financial regulator believes the necessary legal provisions do not cater for Bitcoin and virtual currencies.

The affidavit emphasized that these assets do not appear in “physical form”, and not expressed in Rupees, India’s official currency.

Furthermore, they cannot be considered legal since no central bank issues them. Similarly, the bank’s affidavit pointed there is no sovereign state that issues bitcoin and VCs. These assets cannot, therefore, be recognized as a foreign currency.

Citing the Foreign Exchange Management Act (FEMA), RBI states that for an asset to qualify as a valid currency, it must have characteristics that are similar to those displayed by cheques, money orders, and postal orders.

The Reserve Bank also noted that the Payment and Settlement System Act does not include crypto tokens in its definition of monies or currencies. According to reports in CNN News 18, the RBI said that it cannot declare bitcoin and other digital currencies as legal or illegal.

Some countries have moved to recognize and even legalize the use of bitcoin. However, the RBI has stated that legalizing crypto assets may adversely impact the role of regulatory agencies and other enforcement bodies.

It concluded that:

“RBI cannot unilaterally decide for the Government, on the legality of Bitcoins.”

The RBI caused outcry within the crypto industry in the country when it imposed a banking ban that barred banks from engaging with or providing financial services to crypto businesses.

It meant that many exchanges shut down or shifted their business models. Some have adopted new ways of skirting the ban using an “exchange-escrowed peer-to-peer” model to make it possible for users to deposit and withdraw funds in Indian rupees.

The statement from the RBI comes at a time when crypto exchanges in India looked forward to a favorable ruling from the Supreme Court regarding the numerous petitions before it.

The central bank has, through its affidavit, asked that all petitions are dismissed as the matter at hand involves economic policies.

It also noted that decisions about cryptocurrencies are under the purview of the government and statutory bodies under the financial regulator.

Local news outlets in India have reported that the case will be heard on September 17.

The tussle in the Supreme Court occurs just weeks after the RBI confirmed that it had created an inter-departmental group to look into the feasibility of developing a Central Bank Digital Currency (CBDC).

The Bank released details of the proposed rupee-backed digital currency in its 2017-2018 report.

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