A Bitcoin (virtual currency) logo is pictured on a door in an illustration picture taken at La Maison du Bitcoin in Paris May 27, 2015. British authorities have come out in support of digital currencies in the name of promoting financial innovation, while proposing that regulations should be drawn up to prevent their use in crime. But it is technophiles who are leading the drive to make London a real-world hub for trade in web-based "cryptocurrencies", of which bitcoin is the original and still most popular. Picture taken May 27, 2015. REUTERS/Benoit Tessier - RTX1EWRL
BJP MP Kirit Somaiya has raised concerns on how there is a lack of regulatory structure around bitcoin and wants it to be declared illegal in the country.
During demonetisation, bitcoin trading volume spiked a lot in India and many were worried that it was being used to launder black money.
Speaking to Moneycontrol, Somaiya said that he is expecting a meeting with a senior official from the National Intelligence Grid (NATGRID) to discuss the sudden jump in bitcoin trading in India during the period of the cash ban.
After the government's landmark decision to demonetise Rs 500 and Rs 1,000 currency notes, those hoarding black money tried their hand at various ways through which to convert their ill-gotten stash.
In fact, in the immediate wake of the decision, prices of alternate asset classes such as gold or real estate shot up in the gray market. Unscrupulous jewelers and developers were able to back-date purchasers and pass off old notes which were used to buy assets in the past.
Reports also came which suggested bitcoin to be a possible means to launder black money.
In the Parliament, Somaiya has hit out at the increasing use of bitcoin in India and has termed the digital currency as "hypothetical" and a "pyramid ponzi scheme".
He has further said that if bitcoin is being used like a currency then it falls under the duty of the Reserve Bank of India (RBI) and the central bank cannot afford to be a silent spectator and needs to act.
Below is the complete transcript of the conversation with BJP MP Kirit Somaiya.
Sidhartha: You have raised concerns over the use of bitcoins in India and how in the name of this technology some are trying to dupe innocent people. You want it to be declared illegal in India as there are no regulations around it. But some countries have laid down rules and recently Japan even declared it as a currency. Your views on it?
A: It is illegal. How a private person or a few individuals remain behind curtains can develop their own currency? This self-regulation is nonsense. In a Ponzi scheme, all such arguments like multi-level marketing (MLM) and a pyramid structure have been floated.
This is a civilised society; a currency can be owned, floated, regulated, monitored only and only by a sovereign government. Block technology is a technology. It cannot be converted into currency. A group of people come together and they say we are having our own transaction, what is this? A simple technological legal meaning is 'hawala', nothing else. Simple meaning is non-transparency. If you want to deal among yourselves, you deal through any currency. It could be through dollar, it could be pound, it could be rupee. But you are developing in the name of a modern transaction and it cannot be allowed because nobody owns this; nobody regulates it. How can I allow unregulated currency? All these are absurd arguments.
The few with vested interests, people like zamindars or crony capitalism supporter, have come out with this argument. I cannot agree. I have told the RBI also and SEBI, also. On one side, if you declare it as illegal, how can you allow it to be functioning in the country? It is impossible.
Tarun: So, why are investigation agencies sitting on it and not taking any action?
A: Due to our efforts, now in parliament, the government has gone on record; it is illegal. The first time now, a small group of people, experts representing SEBI, Ministry of Economic Affairs, the RBI, is formed. I do not agree with Japan and what has happened in Japan, nobody knows. It is our country, our nation. I want to see what is bitcoin.
On one side, they are using the word currency. Once you use the word currency, it is automatically illegal. How can a civilised society allow it? Today, bitcoin has come, tomorrow, 'chandi-coin' will come, tje third day, 'plastic-coin' will come. What is bitcoin? What is its value, what is its net-worth? What is its guarantee? And now bitcoin is used for purchasing drugs in colleges. And now, a mis-sell is being done so that you can invest in bitcoin.
What nonsense is going on? If it is a currency, how can a person invest in it? And they say it will be increased by 4,000 percent.
So, all this is nothing but a scam. I told RBI people that during 2007, 2008 and 2009 there was a foreign exchange scam when India lost more than Rs 1 lakh crore. You may recollect that yen price will go up. All top businesses and banks have lost hundreds of crores of rupees. And, now the regulator in America has found out that it was a scam. And top companies have been penalised. What has happened in India? Nothing.
So, the RBI wants all authority; it wants all power. Then, it becomes the responsibility of the RBI. If they cannot allow, I disagree with RBI. They said it is illegal. Now, people who are doing business doing it at their own risk. I do not agree. The RBI has to take action and I will see that they do take action.
Tarun: What about Sebi? Will it also regulate bitcoins?
A: Certainly, because SEBI has asked me to give some information about the exchanges; so, I am trying to collect the information on how it can be traded on the exchanges. But all such exchanges in a way are illegal.
If they are the official exchange, go and get regulated by SEBI. If private exchanges say they are on the internet, then how can my Indian money be invested. How? In air? You have to pay something initially.
Either you have to give something in kind or in rupee or in dollar. It means it is a currency.
And if bitcoin is a product, what are they doing; what are they manufacturing; what are the services; what is the profit and loss account; what are the balances; who is controlling bitcoin? A group of people? Then, it is a barter system.
So, we want to go back 1,000 years? What is blockchain? Blockchain is used for currency or for trading transactions. That means this is hawala or barter system. So, I am very much against it.
Tarun: Do you think that during demonetisation bitcoins were used for money laundering or tax evasion?
A: A few people have expressed such concerns. I am expecting a meeting with a senior official from the National Intelligence Grid (NATGRID). I do not want to pass a comment on that.
Tarun: Transactions over these exchanges happen on the banking side. So, how come banks are allowing this kind of trade?
A: I am going to approach Enforcement Directorate (ED) also. It is the duty of ED; some foreign transactions are taking place in India, through India, through Indian bank accounts. Somebody has to check it. And that is why I am very unhappy with the RBI. How can they knowingly ignore such a thing?
It is the parliament of India, it is the constitution of India; the central bank has to not only regulate but monitor it also.
If through an Indian bank account, some transaction takes place with the foreign banks, if bitcoin is a foreign product, that means it is a foreign transaction; they have to submit details and that is why, I am planning to approach ED and I have written to the government.