Bitcoin, virtual currencies under scanner of Indian regulators to curb money laundering
Finance ministry says circulation of virtual currencies which are also known as digital and crypto currencies has been a cause of concern.Updated: Apr 12, 2017, 16:18 IST
Concerned over the adverse impact of virtual currencies such as bitcoin on the consumer, the government on Wednesday set up a committee to look into ways of regulating the fast-growing segment to curb money laundering.
The move comes amid apprehension that black money hoarders may have resorted to virtual currencies and bitcoins to launder their cash Prime Minister Narendra Modi initiated the demonetisation drive on November 8.
bitcoins have been banned in several countries, including Russia, on grounds that the virtual currency could be used for money laundering or financing terrorism.
The panel has been asked to suggest measures for dealing with virtual currencies including issues relating to consumer protection and money laundering, the finance ministry said in a release.
“The circulation of virtual currencies which are also known as digital and crypto currencies has been a cause of concern,” it said.
Since December 2013, the Reserve Bank of India had also cautioned users, holders and traders of virtual currencies, such as Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.
In December, Rajya Sabha member Rajeev Chandrasekhar wrote to finance minister, Arun Jaitley, and RBI Governor, Urjit Patel, on the proliferation of Bitcoins and its use to launder black money.
“There are already reports of a surge in domestic bitcoin trade and moving of black economy to the Dark Internet. The surveillance and policing requirements are challenging and I suspect the government and RBI are ill-equipped, currently, to deal with this. I am drawing your attention to the need to be ahead of the curve on this rather than behind and so the RBI must develop the capabilities on this urgently.” he wrote.
After the contentious issues of bitcoin and other virtual currencies have been debated in various fora from time to time, the finance ministry has decided to come up with rules to govern it.
To examine the existing framework, the department of economic affairs under the finance ministry has constituted an inter-disciplinary committee chaired by special secretary (economic affairs) and representatives from DEA, department of financial services, department of revenue (CBDT), home ministry, ministry of electronics and information technology, RBI, NITI Aayog and State Bank of India.
The Committee will take stock of the present status of Virtual Currencies both in India and globally, examine the existing global regulatory and legal structures governing virtual currencies, suggest measures for dealing with such virtual currencies including issues relating to consumer protection and money laundering.
The committee has been tasked to submit its report within three months.