Bitcoin Exchanges Operating In India Must Comply With Indian Laws To Be Legal

Bitcoin Exchanges Operating In India Must Comply With Indian Laws To Be LegalBitcoins legal issues are vexing the Bitcoin community of India for long. Some have taken precautionary measures and have preferred to wait till there are clear cut regulatory norms. However, others like BitQuick.in have taken the risk of being prosecuted by launching their website in India without sufficient compliance with Indian laws.

Whatever the strategy one must follow, the Bitcoin community must comply with Indian laws. Among the Bitcoin entrepreneur community, a large segment belongs to Bitcoin exchanges. For some strange reason these Bitcoins exchanges of India believe that they are not required to comply with Indian laws because they are just medium to deal in Bitcoins.

However, they have easily forgotten that these Bitcoin exchanges of India are required to follow many laws of India including the Information Technology Act, 2000. As per the IT Act, 2000 these Bitcoin exchanges operating in India are Internet intermediaries and they are required to comply with cyber law due diligence requirements (PDF) as well.

For instance, BitQuick.in provides in its terms and conditions that Sellers are responsible for following their own regulations in their own legal jurisdictions. BitQuick.in is not responsible for Bitcoins sellers and buyers adherence to financial regulations. In short, Bitcoins has placed the entire legal burden and risk upon the buyers and sellers of Bitcoins.

Further, if the law enforcement agencies of India have to ascertain who are the buyers and sellers of Bitcoins and are they complying with Indian laws, they have no mechanism to do so. Naturally, they would be left with little option but to sue the Bitcoin exchange and its owner itself.

The Bitcoin community has not learnt anything from the past legal actions taken by the Enforcement Directorate (ED). These actions of the Bitcoins exchanges operating in India would only put them in the bad books of law enforcement agencies of India. It would also be difficult for them to ward off the allegations of money laundering, hawala transactions and funding of terrorist activities that is very probable in these circumstances.

Another significant requirement on the part of Indian government would be to block the websites of Bitcoin operators who are not only flouting Indian laws but are also targeting Indian citizens by keeping their servers abroad. These websites should be blocked on the similar lines on which multi level marketing (MLM) companies’ website should be blocked in India. This is so because Bitcoins exchanges having server abroad may not be approachable even with the help of mutual legal assistance treaty (MLAT) between India and other countries like United States.

Just like fraudulent MLM regulations, regulations of Bitcoins exchanges located outside India but having Indian business connections must also be regulated by Indian government. Indian government should not allow these foreign Bitcoin exchanges operating in India to take advantage of the conflict of laws in cyberspace. If this is not done, even the Bitcoins exchanges operating from foreign soils would also flout Indian laws like Google, Facebook, Etc are doing.

However, the ultimate solution to the problems of Indian cyberspace is to formulate techno legal measures to regulate Indian cyberspace. This way foreign companies as well as foreign Bitcoin exchanges operating in India would be sufficiently regulated and they would not be able to take Indian laws for granted anymore.