BENGALURU | MUMBAI: Libra, the cryptocurrency to be unveiled by Facebook next year, will not be available in India, according to a person directly in the know, as current regulations do not permit use of the banking network for blockchain currency transactions.
The social network’s digital wallet, Calibra, won’t be available in markets where “cryptocurrencies are banned or Facebook is restricted from operating in,” the person said. “Facebook has not filed any application with RBI (Reserve Bank of India) for its cryptocurrency in India,” said a second person aware of the matter. RBI did not respond to queries from ET.
A representative for Facebook told ET, “We expect Calibra to work on WhatsApp and be available globally.” The company on Tuesday announced plans for launch of the cryptocurrency by wholly-owned eponymous subsidiary Calibra in 2020.
The social network has partnered with 28 organisations — including Visa, Mastercard, PayU and Uber — that will accept the virtual currency, which will be available on WhatsApp and Facebook Messenger. It expects to have 100 members when it is launched.
In April 2018, RBI had given regulated entities a three-month deadline to stop dealing in virtual currencies due to associated risks.
‘Libra Unlikely to Pass Muster’
However, peer-to-peer transactions of bitcoins are allowed. The regulator’s ban has been contested in Supreme Court by companies that were trading bitcoins in India and the next hearing is on July 23.
India’s regulations, a legal expert said, does not discriminate between digital assets operating in isolation within a network, and digital assets interacting with fiat currency such as the rupee.
“If Facebook were to design the Libra to be a closed system, only to be transacted on its network and not beyond, RBI should ideally be less concerned, since the coin does not engage with the external economy,” said Anirudh Rastogi, founder, Ikigai Law, a technology-focused law firm. “If it is not meant to operate in a closed system, then it is exactly the kind of digital asset that concerns RBI. Regulations as currently drafted seem to indiscriminately apply to both the above examples.”
The argument that this is a stablecoin — a cryptocurrency whose value is pegged to be as stable as the dollar — is unlikely to pass muster with the banking regulator, due to concerns around tax evasion, money laundering and fraud, as per Rastogi.
Calibra also plans to allow real-time conversion to local currency, used to remove any fluctuations in foreign exchange.
Another expert said any entity that uses Libra may fall foul of RBI’s norms as well as provisions of the IT Act, and face penalties. “Under Section 79 of the Indian IT Act, Facebook is obligated to take ‘all due care’ to ensure its network or platform is not used for illegal activities like dealing in cryptocurrencies in India. Section 79 would apply to Facebook even though it is based out of India. Section 75 of the IT Act also gives extraterritorial jurisdiction to the law,” said Salman Waris, managing partner at Delhi-based specialist technology law firm TechLegis Advocates & Solicitors.
Facebook’s WhatsApp is separately attempting to build a payments business in India using the unified payments interface (UPI). However, it has not received approval to launch full-fledged commercial operations and has been running a pilot since early 2018. WhatsApp has over 400 million users in India, while Facebook has over 300 million users, according to Statista.