Introduction:
With the developments all around, the need and discussion for virtual currency is witnessing a huge demand all around the globe. For our understanding it is to be noted that a virtual currency has no physical form, and it does not provide its owner with any inherent rights to property or another currency. Traditionally, the central bank of a sovereign nation creates currency. But it is important for us to analyze the legal perspective and the acceptability of such virtual currency in the Indian legal System.
Currency & Currency Notes
There is no specific definition of currency under the RBI Act, however but it does define foreign currency to have the same meaning as in Foreign Exchange Regulation Act, 1973, which has since been replaced by FEMA.
Section 2(m), Foreign Exchange Management Act 1999 goes on to define currency and includes ‘all currency notes, postal notes, postal orders, money orders, cheques, drafts, travellers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank’. Also Section 2(q), of FEMA defines ‘foreign currency’ as any currency other than Indian currency. Definition of ‘Indian Currency’ under FEMA states that Indian currency is the currency which is expressed or drawn in Indian Rupees.
It is to be noted that section 2(i) of FEMA specifically defines the term Currency notes and include and mean cash in the form of coins and bank notes. So it is clear from this definition that both crypto and bitcoins are out of the preview of the definition within the FEMA Act. Therefore, it becomes a little difficult to call cypto as a currency in the Indian legal system.
The interesting note to be taken care is from the RBI Act. Section 22 of the RBI Act provides that RBI has the sole right to issue bank notes and Section 26 provides that bank notes shall be legal tender in India.
But it is important to point out from the above legal provisions pertaining to currency and currency notes that while Bitcoin have several features of a currency or legal tender it is not bank notes and is consequently not legal tender in India. Accordingly, it is left to be examined if it falls within the purview of securities, derivatives, or commodities. However there has been much discussions on these points but still some legal outcome is yet to be arrived.
Jurisprudence and Virtual Currency
The question at hand is whether a ‘virtual currency’ such as Bitcoin can be said to come under the purview of the definition of currency above. The answer to this question can be found in the maxim ‘expressum facit cessare tacitum’. The maxim represents the principle ‘when there is express mention of certain things, then anything not mentioned is excluded’. The maxim has been recognized by Indian courts and was also relied upon by the Supreme Court in Shankara Rao Badam & Ors. v. State of Mysore & Anr [1985] AIR SC 1416. Considering the provisions of the law, it can be reasonably concluded that ‘virtual currency’ should be considered excluded from the definition of currency. While it may be argued that it may fall under ‘such other similar instruments’ under Section 2(h), but such ‘other instruments’ need to be specifically notified by the RBI which is not the case. There is no such declaration in respect of crypto currencies in general or Bitcoin in particular. Also in Tata Consultancy Services v State of Andhra Pradesh, 271 ITR 401 [2004], RBI has merely advised the public to be cautious regarding the trading of virtual currencies. Therefore, under the provisions of existing law, Bitcoin are not currency.
Conclusion:
Therefore, in the light of the above brief background it is to be noted that there is no statutory recognition of crypto as a currency in India. Also, the courts have time and again held that they can not be treated as a currency in India and have no legality in laws and also RBI expressly does not recognize crypto as a currency.
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