Bitcoin and India

Ministry of Finance said that virtual currencies (VCs), including  bitcoins, are not currencies. “VCs are not currencies. These are also  being described as ‘coins’. There is however no physical attribute to  these coins. Therefore, VCs are neither currencies nor coins,” the  ministry said in a press statement. It further clarified that virtual  currencies are not backed by government fiat. “These are also not legal  tender. The government or Reserve Bank of India (RBI) has not authorized  any VCs as a medium of exchange.” With this statement, there is finally  some clarity on how India plans to treat bitcoin. So far, it was not  clear if bitcoin would come under the purview of Reserve Bank of India.

Why not a currency

Bitcoin exchanges are not surprised  by this move. “For the government to give virtual currency a currency  status has a bigger implication, especially due to the capital controls  we have here in India. If they give it a status of currency, they have  to allow us to run the exchanges here. If they allow the exchanges, how  are they going to control the flow of money in and out of the country? I  was expecting this to happen,” said Praveen Kumar, chairman and chief  executive officer of Belfrics Global SDH, a company that runs bitcoin  exchanges in Singapore, Malaysia, Bahrain, Japan, Kenya, Nigeria,  Tanzania and India. Why has the government clarified about coins?  “Several initial coin offerings are coming up in the country. Some term  it as currency or coins. From a layman perspective, they can assume that  it is something similar to what central banks issue as coins. It is a  clarification that the government is not regulating the virtual  currencies and coins,” added Kumar. 

What it means for you

Last year, a few countries  accepted bitcoin as a legal payment system. For instance, from 1 April  2017, bitcoin has become a legal payment system in Japan. Meanwhile,  Singapore-based startup TenX last year allowed conversion of bitcoins on  Visa cards to make payments. You are unlikely to see such kind of  changes in payments in our daily transactions in India post the recent  announcement. Meanwhile, the income-tax department is  keeping a watch and hence if you have gained any profits from bitcoins,  you will have to pay capital gains tax on it. Currently,  income-tax department, enforcement department, the Securities and  Exchange Board of India and Ministry of Finance are tracking virtual  currencies. You can expect further developments in the virtual  currencies space in the coming weeks.

Source: livemint- Viviana Vishnathan

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