Bitcoins emerged as a valuable investment in India in the year 2013. However, the legality of Bitcoins in India was always in doubts. Nevertheless the e-commerce entrepreneurs in India kept on investing and dealing in Bitcoins. They also forget to comply with Indian law, including the cyber law of India.
For instance, the IT Act 2000 prescribes cyber law due diligence in India and the Internet intermediary liability in India. These cyber laws due diligence and Internet Intermediary requirements squarely apply to use of Bitcoins in India. Further, money laundering, foreign exchange and security dealing laws also apply to Bitcoins dealings and trading in India.
Meanwhile, China, France, Thailand, etc have either regulated the use of Bitcoins or they have completely banned them in their jurisdictions. But the Reserve Bank of India (RBI) and Indian government kept on sleeping over the issue. As a result the Bitcoins frauds and crimes kept on increasing in India.
As the pressure mounted, the RBI cautioned users of virtual currencies against various risks including legal risks. Soon after the cautious advisory, the enforcement directorate (ED) swung into action and raided two Bitcoins websites and their offices. ED believes that Bitcoins money can be used for hawala transactions and funding terror operations and this seems to be a legally plausible explanation as well.
Actually, the Bitcoin website owners have themselves put into trouble as they simply assumed that there are no legal compliances that are required to be fulfilled. It is well established that e-commerce compliances in India are required to be fulfilled.
As on date the Bitcoins websites in India are under regulatory scanner and are vulnerable to all sorts of legal actions. In fact, Seven Digital Cash LLP is already facing legal risks for dealing in Bitcoins in India.
The cyber law trends of India 2013 by ICT law firm Perry4Law has cautioned that Bitcoins websites may further face legal actions if they fail to comply with Indian laws in the year 2014. We hope that the Bitcoins saga would not end up in the prosecution of Bitcoins entrepreneurs in India.