Mohammed Danish, who is an Advocate practicing in the High Court of Delhi on Medium writes about the stance of Law Commission of India on cryptocurrencies and the ongoing scenario engulfing the RBI banning cryptocurrency dealings in India.
For who do not know the exact function of Law Commission of India, it is an executive body established by the Government of India to advice it on legal reforms. Its membership primarily comprises of legal experts. Law Commission is appointed for 3 years and works as an advisory body to the Ministry of Law & Justice. The Commission works upon the assigned agenda and primarily comes up with research based reports, often conclusive and recommendatory.
On 5th July 2018, the 21st Law Commission chaired by Justice B.S. Chauhan published its 276th Report titled “Legal Framework: Gambling and Sports Betting including Cricket in India”. In this report, the Law Commission has also discussed the role of Crypto Currencies in the rise of online gambling in India and how it should be dealt with.
Justice Mukul Mudgal was appointed by the Supreme Court of India to probe deep into the allegations of match fixing and betting in Indian Premier League (IPL) which was leveled against various individuals including players and BCCI functionaries.
Various individuals were found guilty of match fixing and betting and Mudgal Committee, inter alia, said it loud that the investigative agencies lamented their inability in identifying on time several sports frauds and came up with the suggestion that legalization of betting may reduce involvement of black money and would also help them in detection of fraud.
Addressing the concern, the Supreme Court later constituted Lodha Committee to recommend reforms in practices and regulations of BCCI. In its report, Lodha Committee distinguished between match fixing and betting. It emphasized the need for their separate treatment by making the former a criminal offence and regulating the latter.
Post the episode, the Supreme Court asked the Law Commission to study the possibility of legalizing betting in India.
Law Commission treats “Crypto Currency” alike with other recognized electronic means of payment such as Credit Cards, Debit Cards and Net Banking:
Now with deep assessment and other “conclusions and recommendations” section of the Report, the Law Commission opines that gambling and betting should be offered only by licensed operators with valid licensed and the amount of gambling transactions for every individual should be restricted with the help of PAN Card and Aadhar.
The report goes on with the recommendation that similar restriction should also be prescribed when gambling transactions are done by way of electronic money. It is surprising yet good news for Cryptocurrency Community in India that Law Commission has treated “Crypto Currencies” alike with other recognized forms such as Credit Cards, Debit Cards and Net Banking.
“Similar restrictions should also be prescribed for the purpose of the amount one would be allowed to stake while using electronic money facilities of the likes of credit cards, debit cards, net-banking, VCs, etc.”
However, the report by the Law Commission of India didn’t talk much about the current situation on the ban on the cryptocurrency dealings in India imposed by the RBI; it however positively included the Cryptocurrency along with other electronic means of payment.
Since the regulation on cryptocurrency has been announced to be coming soon, is it implied that the Law Commission’s recommendation at this stage indicate its insider knowledge on the prospective treatment of Cryptocurrency by the Government?
RBI and Cryptocurrencies
While discussing the need for regulation of gambling in its report, the Law Commission of India also briefly mentions about the RBI circular dated 6th April 2018 and also the litigation which has followed.
Unfortunately, the Law Commission which is the apex advisory body of legal experts, has misinterpreted the legal status of Crypto Currencies in India and claims that its “use” has been outlawed by RBI in the following words:
“The issue of Online Gambling has further been worsened by the rise in popularity and ease of availability of VC, a form of electronic money. Having taken the form of a parallel economy, gambling with VC, pushes even the Online Gambling market underground, and very often, out of the reach of the law enforcement authorities. The Reserve Bank of India by way of Circular dated 6th April outlawed the use of VC. The circular was challenged by the Internet and Mobile Association of India. The Supreme Court while entertaining the petition refused to grant any interim relief to the petitioner vide Order dated 3 July 2018.”
The Law Commission and such statements quickly recalls the statements issued by various known faces, following the budget speech of Finance Minister, baselessly claiming that Bitcoin/Cryptocurrency is not legal! The similar remarks coming from the apex legal adviser of the Country poses a serious question on the acumen employed and research done before publishing “the 276th” report which is going to carry India’s image across the borders.
The RBI has banned the banks from Cryptocurrency dealings but not on the use of Cryptocurrency.
Moreover, the RBI has itself stated in its affidavit submitted to the Supreme Court that Crypto-currencies fall far short of being a true ‘Currency’ as there is no enabling provision under the existing laws to treat Bitcoin as currency, therefore the question of declaring Cryptocurrency as legal or illegal does not arise.
Now the question arises as to how the Law Commission can claim the use Cryptocurrency being outlawed by RBI when RBI itself has taken a contradictory stance on affidavit before Supreme Court?
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