Bitcoins, their functionality and legality of use is a matter of debate world over. Nations around the world are observing the developments happening around the realm of Bitcoins. Bitcoins have been banned in Thailand and may be illegal in India as well unless laws are followed by those engaged in using Bitcoins in India. China is encouraging the use of Bitcoins whereas United States is reconsidering its decision to regulate use of Bitcoins in its jurisdiction.
Meanwhile cyber criminals and crackers have started exploiting software and the platforms using Bitcoins. In one such incidence Sheep Marketplace, the descendant of Silk Road, has been compromised and 5,400 Bitcoins (worth about $5.6 million) have been stolen. Though efforts to trace back the cyber criminals are in progress yet the very nature of Bitcoins would make it very difficult to trace the stolen Bitcoins.
The way this entire episode has taken place, it seems to be more on the side of a pre planned activity than a mega cyber heist. Some victims have even claimed that the website had been operating for some time as a honeypot designed to collect Bitcoins in advance of a prepared heist. This accusation, if true, would be an unprecedented example of a business calmly collecting money in order to steal it. The possibility of involvement of law enforcement agencies also cannot be ruled out.
Former Federal Reserve Chairman Alan Greenspan said the high trading prices of the Bitcoin could not be sustained and that the virtual currency is not really money. Greenspan added, “I do not understand where the backing of Bitcoin is coming from. There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.”
As far as India is concerned, illegal use of Bitcoins increasing and RBI and Indian government are sleeping. While the trading of Bitcoins has been suspended in Thailand due to Bank of Thailand advisement (PDF) yet the Reserve Bank of India (RBI) is not fulfilling its statutory duties in this regard. As a result Bitcoins are used in India for multiple purposes including conducting medical and surgical abortions in India.
Many Bitcoins enthusiastics wonder whether use and dealing in Bitcoins legal or illegal in India? There is no straight forward answer to this question but the legality of Bitcoin in India is in doubts. Some Regulatory Guidance regarding Bitcoins can be obtained from the Indian Virtual Currency Schemes issued by RBI but Regulatory Authorities like RBI, Medical Council of India, etc must clearly specify the use and manner of use of digital currencies like Bitcoins for various purposes. Bitcoins, their functionality and legality of use in India is still a “Grey Area” till then.
Those companies and websites that are accepting Bitcoins in exchange of goods and services are doing it in an illegal manner and they can be prosecuted and punished. It is always better to observe cyber law due diligence before engaging with Bitcoins in India in any manner whatsoever.