BAI presents press conference addressed by Nishith Desai

Bitcoins Alliance India (BAI), a community of Bitcoin entrepreneurs, welcomes the RBI warning about the risks surrounding the purchase, sale or use of Bitcoins. In light of the recent events, BAI appointed Nishith Desai Associates, an international Legal and Tax Counsellors, to examine the legality of Bitcoins.

Nishith Desai the Founder and Managing Partner of Nishith Desai Associates clarified that “Our Bitcoins Practice Group examined the issue from techno-legal perspective and have found that Bitcoins per se are not illegal in India. This is in consonance with international approach. US considers Bitcoins as a legitimate payment alternative. US Senate Home Land Security and Government Affairs Committee and the Senate Banking Committee consider that virtual currency has legitimate uses.”

Similar positions have been taken by Canada, the UK, Norway, Germany, Sweden, Israel, Cyprus, Turkey, Australia, Argentina and several others. Monetary Authority of Singapore has stated that whether or not businesses accept Bitcoins in exchange for their goods and services is a commercial decision and it will not interfere with it. China has restricted only financial institutions from dealing directly in Bitcoins without making it illegal.

Bitcoin is cryptographic digital product first described in a 2008 paper by single or group of pseudonymous developer(s) by the name of Satoshi Nakamoto who called it a “peer-to-peer electronic payment system”. Bitcoin creation and transfer is based on open source cryptographic protocol managed in a decentralized manner.

The Bitcoins look like currency or money, but it is not. It sounds similar to security, but it is not. It feels like a derivative or a negotiable instrument, but it is not. It’s not pre-paid instrument either. While in the US, Bitcoins are regarded as a commodity, it is doubtful whether it could be considered so in India as it is an intangible property.

At best it is a combination of protocol, data, and software program stored at multiple locations. When transacted it involves some kind of bartering. If the Bitcoins themselves are sold for a price in terms of ‘money’, Sale of Goods Act would apply but accepting Bitcoins against goods should not attract the provisions of Sale of Goods Act. Provisions of FEMA would not be triggered especially when the transactions are intra-India. Even importation of Bitcoins would be legitimate if transactions are carried out through proper banking channels. In any event as a commercial transaction the provisions of the Indian Contract Act would have to be complied with. Consequently a transaction in relation to Bitcoins must be for lawful consideration and should not be opposed to public policy. However, exporting goods from India against Bitcoins would not be permissible as the proceeds of exports must be repatriated to India in terms of foreign exchange through normal banking channels. Thus Bitcoins per se are not regulated by any authority as it an ‘internet product’ so to say.

It came to us as a bit of surprise that the BAI traders have a stringent KYC (know your client) process which is voluntarily followed by them. It appeared to be similar to the process followed by Indian banks. Further, it has been clarified to us that they would be willing to share all information with regulatory authority in accordance with law.

Whether the Bitcoins can be used for illegal trade is a question often asked. Yes, like any other cash it can be. But the cash is simply not traceable except by catching someone with physical possession. Bitcoins are far more traceable than money especially when traded through Bitcoin traders. BAI is committed to develop further standards of openness and transparency in collaboration with the regulators.

If properly harnessed, Bitcoins in general have number of benefits:

1. Facilitates “financial inclusion” to the poor and unbanked population

2. Significantly reduces transaction costs

3. Enables the growth, ease and security of both ecommerce and physical transactions

BAI urges the government to clarify that the Bitcoins are not illegal per se, however, they are saddled with number of commercial risks including its volatility, loss of hardware, digital wallet, etc.

CoinMonk Ventures is a member of Bitcoin Alliance of India

This is just to let all of our users know that now CoinMonk Ventures Private Limited is a member of Bitcoin Alliance of India (BAI) www.bitcoinalliance.in

Our users can also be a part of the alliance. Check the BAI website for membership options.

IRS visit to CoinMonk Ventures registered office in Tumkur

Today (December 31st 2013 at 11.30am) there was a visit from IRS headed by a Deputy director, Income tax department – Investigation wing, Bangalore. Out of that two guys had attended bitcoin conference on Dec 15th.

After they completed their formal procedures by the team, they checked some CoinMonk Ventures registered objectives and also KYC documents of Unocoin customers.

Then there was a dicussion on bitcoin and its mining, technical possibility to apply income tax to miners and bitcoin business in general, possible regulation at entry and exist level at exchanges.

I have provided them some documents related to bitcoins and KYC collected from Unocoin customers as per their instructions.

A summons issued to have me visit them in Bangalore. All i can say regarding today discussion is, I was able to lead it in as positive way.

Info on visit to I T dept office in Bangalore on 1st Jan 2014: Met with a couple of higher authorities and the discussion was around technology and traceability. Presently they have instructed me to submit a paper describing how bitcoin works, how transaction works, how to mine bitcoins and what happens technically in bitcoin mining, to what extent bitcoins are traceable and what role an authorized exchange can play, how bitcoin can be misused and if it can be mitigated in some way, what is the view of bitcoin from various other countries, and my opinion on how bitcoin can be taxed for speculators and miners. I will be working on this once i am back from Mumbai.

I did question IRS Dy Director that if he knows any law or clause that we are violating if we continue our Unocoin service as long as I T department is concerned and declare income and pay income tax for which he has replied that we should be fine for now. How ever he said he cannot talk on behalf of other departments and have asked me to take legal opinion before I start Unocoin service again – and I am in the process of doing so.

I am visiting Mumbai for two days from tomorrow for a press meet along with Nishith Desai associates to talk about the present situation of bitcoin in India and asking authorities through media to react to the present situation asap.

– Sathvik Vishwanath

Founder CEO of CoinMonk Ventures Private Limited

Temporary buy and sell suspension

Post notice from RBI http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247 Unocoin has decided to temporarily pause its buy and sell operations. All the pending orders today gets fulfilled and no more orders will be accepted till further notice. This is done to protect our valuable customers from getting into unintended legal risks.

Logins from the users is suspended as well for time being.

You can contact us on [email protected] if you need any further clarification.

– CoinMonk Ventures – Unocoin Team

Reserve Bank warns against Bitcoin use

From THE HINDU dated Dec 24th 2013

The Reserve Bank of India, on Tuesday, warned the public against the use of virtual currencies such as Bitcoin, pointing out that users expose themselves to potential financial, legal and security related risks.

The public advisory comes after the borderless digital currency has begun to gain widespread acceptance in India, despite poor Internet penetration and a natural scepticism to assets not backed by tangible entities such as land.

The central bank also said that it had been “examining the issues associated with the usage of virtual currencies” under the legal and regulatory framework of the country.

In its list of potential risks, the apex bank highlights problems such as losses arising out of hacking, no sources of customer recourse and the general financial volatility surrounding Bitcoins.

“The creation, trading or usage of virtual currencies including Bitcoins are not authorised by any central bank or monetary authority. As such, there is no established framework for recourse to customer problems,” the RBI said in a statement.

“It has also been reported that Bitcoins are being traded on exchange platforms, whose legal status is also unclear. Hence, the traders of virtual currencies are exposed to legal as well as financial risks,” it added.

Gaining currency

Bitcoins, and other virtual currencies, have been gaining currency quickly in India. According to SourceForge, an online platform that connects consumers to open-source projects such as Bitcoin and facilitates client downloads, there have been 35,648 downloads in India since the launch of Bitcoin on November 9, 2008.

A number of India-based trading platforms and exchanges have sprung up over the last six months, catering to Indian users by allowing them to purchase Bitcoin in rupees. The RBI, however, has pointed out that no regulatory approval has been obtained by any entities that carry out such activities.

“There have been several media reports on the usage of Bitcoins for illicit and illegal activities. The absence of information of counterparties could subject users to unintentional breaches of anti-money laundering,” the central bank said.

The mainstream Bitcoin community in India has welcomed the RBI’s shift from its earlier ‘wait-and-watch’ policy, and believes that specific regulation may be in the offing.

“Of course, it is good that the RBI has shifted from not saying anything to warning people of the risks involved. Yes, trading platforms in India do not have approval, as there is no regulation in the first place! We believe this advisory notice may be a precursor to some regulation,” said Satvik V, Founder, CoinMonk Ventures, who organised India’s first Bitcoin conference earlier this month.