The Supreme Court of India has recently issued notice to the Ministries of Finance, Law and Justice, Information Technology, market regulators Securities and Exchange Board of India and the Reserve Bank of India after hearing a Public Interest Litigation (Writ Petition (Civil) no.1076 of 2017) under Article 32 of the Constitution against the Union of India filed by Adv. Dwaipayan Bhowmick (hereinafter referred to as “Petitioner”) seeking a regulatory framework to be laid down on Crypto Currency and wanted that the virtual currency be made accountable to the exchequer.
The first time that a petition was filed in the Supreme Court seeking a similar kind of regulatory framework was in July 2017. A Public Interest Litigation was filed (Writ Petition (Civil) no. 406 of 2017) under Article 32 of the Constitution against Union of India, Ministry of Finance and the Reserve Bank of India over the use and business of Bitcoins, Litecoins, Ethereum etc. The Supreme Court on July 14, 2017, directed the RBI and the other concerned ministries to clarify their stance and enact a bill on the same before disposing off the PIL.
RBI executive director had earlier on September 13, 2017 stated that, “RBI is not comfortable with Crypto Currency/ Bitcoin” . The above statement makes it clear that neither the RBI nor the Government per se appears to be leading the framework as far as regulation of Bitcoin is concerned.
What is Bitcoin?
Bitcoin is a digital currency that allows people to buy goods and services and exchange money without involving banks, credit card issuers or any other third party. Bitcoin is not tied to a bank or government and allows users to spend money anonymously.
Bitcoin was introduced in 2008 by an unidentified group of programmers as a cryptocurrency as well as an electronic payment system. It is, reportedly the first decentralized digital currency where peer-to-peer transactions take place without any intermediary.
Money used to buy Bitcoin from foreign locations is completely untraceable and may be used for trading and various other financial activities directly from such Bitcoin accounts without any accountability, such trades affect the market value of other commodities inevitably.
There are over 20 other cryptocurrencies which exist today. Most of them came after bitcoin, even though bitcoin was precisely not the first. The list includes Litecoin, Peercoin, Primecoin, Ripple, Quark, and more. However, bitcoin is the only one which has created any kind of buzz, including in developing countries like India.
Primary Concern of the Petition
In the petition, the Petitioner has sought explanations regarding the delay over regulatory frameworks. The petition says,
“Lack of any concrete mechanism pending the regulatory framework in said regard has left a lot of vacuum and which has resulted in total unaccountability and unregulated Bitcoin trading and transactions. For the delay in such a situation has the seed that can cause grave financial implication on the economy of the country. It is pertinent to mention herein that emerging trend of crypto money if unchecked and unregulated is a threat to exchequers money and financial sovereignty of the country.”
The primary concern of the petition is whether in India, Bitcoin be allowed or not, as the Chinese government has banned the issuance of new digital coins for fundraising, also known as initial coin offerings, and the Russian courts pronouncing the transfer of cryptocurrency into Roubles as illegal.
The Petitioner in his petition had prayed to the Supreme Court to:-
- Issue urgent directions of appropriate nature so as to direct the Respondents to regulate the flow of Bitcoin (crypto money) and to ensure that the same be made accountable to exchequer;
- Constitute a committee for framing of appropriate mechanism to regulate the flow of Bitcoin (crypto money) and to ensure that the same be made accountable to exchequer;
- Constitute a committee of experts to consider the prohibition/regulation of Bitcoin & other crypto currency.