Some businesses in India believe that they have found a loophole in the finance minister’s speech that sought to clamp down on the use of cryptocurrencies. While this loophole may allow startups to accept bitcoin without breaking the law, experts question its viability.
The Loophole
Indian finance minister Arun Jaitley.
As the Indian government is working on the regulatory framework for cryptocurrencies, startups in the country are finding a way to accept bitcoin and other cryptocurrencies without breaking the law.
The country’s finance minister Arun Jaitley announced during his Budget speech last month that “the Indian government considers cryptocurrencies illegal and vowed to stamp out their use,” Tech Circle wrote and elaborated:
"However, Jaitley did not specifically state that trading in cryptocurrencies was illegal, which is why it continues to be business as usual for Indian cryptocurrency exchanges such as Zebpay and Unocoin".
The news outlet interviewed the operator of a used car marketplace in Mumbai, Truebil, which is “capitalising on this apparent loophole.” The startup, founded in 2015 and operated by Paix Technology Pvt Ltd, has devised a way to accept cryptocurrencies as payment, specifically bitcoin. Each month, the company claims to sell 200 cars and add 1,000 new listings, Techcrunch reported.
Partnership with Unocoin
“Truebil will be accepting bitcoin payments at its brick-and-mortar stores using Unocoin’s POS application,” the publication clarified. The company itself does not display any prices in bitcoin and does not accept payment in the digital currency online. Its co-founder and marketing head Shubh Bansal told the publication that “this move is perfectly legal,” emphasizing:
"We are not accepting the [crypto] payments directly…Unocoin as our partner will receive the ‘crypto-assets’ from the consumer and then change it into a fiat currency before depositing it in our bank account. This brings it under the legal purview of existing laws".
Unocoin is not charging the startup or its customers, Truebil noted. Vice president of sales and business alliances at Unocoin, Naveen CT, told the news outlet that “the partnership with Truebil will help increase the number of points where cryptocurrencies are accepted in India.”
There are other businesses in India looking to accept digital currencies without breaking the law. An industry expert explained, “Many companies are taking a route similar to that opted by game companies which allow users to buy virtual coins and spend them in the game,” the publication conveyed, adding that “This is quite legal and is in common use by Android game developers.”
Is This Arrangement Really Legal?
The news outlet asserted that legal experts have doubts about this arrangement. Prashant Phillips, a partner at law firm Lakshmikumaran & Sridharan told the publication that “Such transactions would most certainly be on the government’s radar.”
While acknowledging that there is no specific provision to penalize crypto transactions, “the government has clearly indicated that it considers the validity of such dealings to be on par with ponzi schemes,” he explained, adding:
"If a formal notice is passed declaring such transactions as ponzi schemes, then such transactions may be punishable in terms of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978:.
Do you think the Indian government will have a problem with this method of accepting cryptocurrencies? Let us know in the comments section below.