Bitcoin fans seek legal aid for regulatory clarity

BANGALORE: The Bitcoin community in India is courting legal help to clear the air over virtual currencies in India after the Reserve Bank of India warned of the financial, operational and security-related risks enthusiasts were exposing themselves to. Many bitcoin businesses across India have shut shop fearing arrests and raids by tax officials.

Bangalore-based Chaitanya & Associates Advocates has given a representation to the RBI governor on behalf of Badaravada Venugopal, seeking specific rules, regulations and guidelines by February 7, 2014, failing which they would approach the Supreme Court. “The RBI has not yet replied to the representation. I have started drafting procedures to approach the Supreme Court on this issue,” said advocate Chaitanya. “One of the points mentioned in the RBI release is a veiled threat that the users may unintentionally breach antimoney laundering and combating the financing of terrorism laws,” the representation stated.

Sathvik Vishwanath, founder, Coinmark, who had closed down his virtual currency site for a week following the RBI release, says he reopened the site after assurance from legal leaders like Nishith Desai and Associates, that there was nothing illegal in carrying out Bitcoin operations in India.

The Bitcoin Alliance of India and Nishith Desai Advocates will be meeting the RBI officials in the third week of February to explain what virtual currencies are all about, Vishwanath said. “There was a lot of panic in the first week of January and lot of selling of bitcoins then,” following the RBI’s warning, he said.

Virtual currency sites like MadOverCoins, have not started trading activities yet, according to the site’s spokesperson Natasha Ambrose. “We are in talks with the income-tax officials in Bangalore, explaining the tax implications of Bitcoin trade in India,” said Natasha, whose site has products, mainly for NRIs, who wish to order them in exchange for bitcoins. “We are merely educating people on how they can exchange their bitcoins for services,” said Natasha, whose site has products from coconut water to a Bullet Enfield.

There is very little that the RBI can do to stop virtual currency trade, explains Benson and Jincy Samuel, founders of CoinSecure.in. "Despite the RBI warning and the ambiguity on guidelines, PCI Riser cards, which are used for tackling Bitcoin algorithms are almost sold out in India,” Benson said.

And the level of interest in Bitcoins is only rising, with over 30,000 downloads of the Bitcoin software (called Bitcoin qt) in India. But the exact number of Indians engaging in virtual currency trade is still unknown. “Most of the entrepreneurs are in the below 40 years range. So, any warning from the RBI triggers a spontaneous reaction from them and they shut shop,” said Benson.

Jincy says her firm gets almost 3,000 queries every month, mainly on the legal aspects of starting a bitcoin site.