Governments vs. Cryptocurrencies: Crypto Ban in India
If you look at a world map that shows the state regulations on cryptocurrencies country by country, the overall picture looks rather positive. Europe and almost all of the Western World are permissive to cryptocurrencies, some Asian countries are cautious, and only a couple of countries around the world are openly hostile. Such a state of affairs must be a positive sign – if crypto is allowed and regulated according to local laws, it’s only a matter of time before mass adoption occurs.
However, the devil is in the details, and any country, even one seemingly shining with the green light of permission, has a lot of pitfalls upon closer look. Controversial news coverage, secretiveness of some governments, and inconsistent law enforcement plague a lot of countries. We had an article on this topic about a month ago, but as a lot has changed and happened since that time, we’ve decided to revisit some of those countries, taking a deeper dive into the current state of affairs in some of those, one by one.
We’ll start from one of the biggest and most controversial one out there, who is currently sitting in a “grey zone”:
Currently, digital currencies are not banned in India. But regulatory authorities have repeatedly cautioned users and traders about their risks and disassociated themselves from crypto transactions. Also, local banks denied service to cryptocurrency-related businesses and Parliament repeatedly postpones hearings on cryptocurrency regulations.
The country has been looking for a regulatory framework since the beginning of November 2017, when the first panel to “propose specific actions to be taken in relation to Virtual Currencies” was held.
The committee submitted its report a year and a half later, stating that it:
“recognises that while technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system, virtual currency in and of itself does not have any of the benefits associated with a fiat currency”.
“in view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time.”
On the other hand, the committee noted that it is in favor of a central bank digital currency (CBDC), that could be issued and controlled by a national bank, as a cheap and safe way to transport funds as compared to cash, especially across the border.
In 2018 Arun Jaitley, the former Finance Minister clarified that cryptocurrencies are not a legal tender and that the government would strive to eliminate their use in “financing illegitimate payment systems or as part of the payment system.”
The RBI (Reserve Bank of India) pro also repeatedly stated that private currencies are not legal tender in the country and warned their users of the various risks of dealing with such virtual currencies. It also prohibited banks from providing services to cryptocurrency-related firms.
Due to the April 2018 ban from RBI and overall uncertainty about the future of crypto in India, a handful of exchanges ceased operations there. Koinex, who shut down operations at the end of this June, pretty much summed up the problems enterprises in blockchain are facing in India at the moment:
“We have consistently been facing denials in payment services from payment gateways, bank account closures, and blocking of transactions for the trading of digital assets. Even for non-crypto transactions like payment of salary, rent, and purchase of equipment, our team members, service providers and vendors have had to answer questions from their respective banks — just because of an association with a digital assets exchange operator.“
Blanket Ban Bill
On April 26, another headline was born: “India is banning cryptocurrencies”, which had already caught the spotlight in June. It was a bill titled “Prohibition of cryptocurrency and regulation of the bill on official digital currency, 2019” and had no linked source of information, however, it brought panic to the crypto market. Even after a superficial reading, it clearly wasn’t aimed at as a “blanket ban” on cryptocurrency use, but rather at penalizing certain activities.
But the damage had already been done. As the aforementioned Koinex stated, the article “has created enough FUD in the Indian crypto trading community to result in a sharp decline in trading volume and [instill] a clear discomfort for all the law-abiding citizens of this great nation.”
Indian crypto-entrepreneurs tried to calm people down, pointing out that it is not a public, but a private bill, which can be prepared by virtually any member of parliament and has to go a long way before being published, not even speaking about becoming a law.
Nischal Shetty, CEO of local crypto exchange Wazirx:
“This looks like a very very rough draft of a proposed bill … [it might be] just a random discussion paper and it may not actually become [a] bill in the same manner and mode in which this has been stated.”
At a sitting on July 16th of the upper house of Indian Parliament, the Minister of Finance was asked by Parliament member Shri Dharmapuri, “Will the Minister of Finance be pleased to state: (a) whether [the] government has prohibited cryptocurrency in the country; (b) if so, the details thereof.”
Shri Anurag Singh Thakur, Minister of State in the Ministry of Finance had a simple answer:
On July 22, the finance ministry published a report that included the notorious bill. According to the report, “The mandate of the committee has been to study various issues pertaining to virtual currencies and to propose specific actions that may be taken in relation thereto. The committee is very receptive to and supportive of distributed ledger technologies and recommends its widespread use in delivering financial services … Private cryptocurrencies are of no real value. Rightly banned.” It had authorship of Subhash Chandra Garg, Department of Economic Affairs (DEA) Secretary.
The group has proposed that the Government establish a Standing Committee to revisit the issues addressed in the report as and when required. The announcement by the Ministry of Finance states: “This report and the draft law will now be reviewed in consultation with all departments and regulatory bodies concerned before the government makes a final decision.”
-Founder of Indian cryptocurrency exchange Cryptokart, Gaurang Poddar, announced that his company is shutting down in a LinkedIn post published last week.
-Speaking to a local daily news source The Economic Times, a Facebook spokesperson stated: “There are no plans to offer Calibra in India. As you may know, there are local restrictions within India that made a launch of Calibra not possible at this time.”
-At the conclusion of the summit, the leaders of the G20 nations, including Indian Prime Minister Modi, jointly issued a declaration that includes statements on crypto assets. They declared, “We, the leaders of the G20, met in Osaka, Japan on the 28-29th of June 2019 to make united efforts to address major global economic challenges … We reaffirm our commitment to applying the recently amended FATF standards to virtual assets and related providers for anti-money laundering and countering the financing of terrorism.
-The Indian supreme court has set a new date to hear the crypto case that was originally scheduled to be heard on July 23. The court is expected to address the writ petitions against the RBI banking restriction as well as the government’s report and the recently released drafted crypto bill. On July 24, the court set a new tentative date of Aug. 2 but later updated it to July 25 for all five pending crypto petitions. And on July 25 it was postponed once again.
– On July 24, Subhash Chandra Garg, an official who proposed the notorious bill, was transfered by Prime Minister Modi to the Ministry of Power.
The article is prepared by team of Lumi Wallet, a multi-wallet for your crypto.