Ultimate Resource For The Crypto Industry In India (#GotBitcoin?)
The Supreme Court of India has struck down the Reserve Bank of India’s (RBI) controversial ban on banks’ dealings with crypto-related firms. Ultimate Resource For The Crypto Industry In India (#GotBitcoin?)
The court’s bench of Justices Rohinton Nariman, S Ravindra Bhat, and V Ramasubramanian, delivered the judgment earlier today, March 4, litigation news site Live Law reported.
India’s central bank, RBI, had imposed a blanket ban on banks’ dealings with crypto businesses back in April 2018, which came into effect in July of that year.
Following both public and industry-led petitions, a case combining challenges against the central bank was brought before the Supreme Court by the Internet & Mobile Association of India (IAMAI). Hearings for the challenge were held over two weeks in January of this year.
IAMAI is a not-for-profit industry body whose mandate is to appeal to governments on behalf of internet industry consumers, shareholders and investors. Members include Yahoo! India, Apple, eBay, Unocoin and Etsy.
Live Law reports that the justices ruled that the RBI’s action was “disproportionate.” Key arguments in the case included the central bank’s contention that cryptocurrency is a digital means of payment and that the institution was “empowered by law” in its intervention.
This was countered by IAMAI counsel Ashim Sood, who argued they can oscillate between serving as a commodity or store of value and as a medium of exchange. Sood argued that RBI did not have the jurisdiction to ban financial firms from providing services to cryptocurrency-related businesses.
The Future Of Crypto In India
With the court delivering its verdict on the landmark RBI case, the legal and regulatory climate for cryptocurrencies in India now appears to face one last hurdle. In fall 2019, the Indian government opted to delay the introduction of a draft bill on a potential cryptocurrency ban to parliament in the 2019 winter session.
The bill — entitled “Banning of Cryptocurrency & Regulation of Official Digital Currencies” — reportedly aimed not only to impose a complete ban on the use of crypto in India but also to establish the foundations for a state-backed “Digital Rupee” issued by the Reserve Bank of India.
Supreme Court Post-Game: It’s A ‘Historic Day’ For Crypto In India
Earlier today, India’s Supreme Court delivered its verdict in a landmark case for cryptocurrency in the country.
A bench of three justices ruled that the Reserve Bank of India’s (RBI) ban on banks’ services to crypto-related firms was unconstitutional.
Kashif Raza — co-founder of the Indian crypto regulatory news and analysis platform Crypto Kanoon, which first broke news of the ruling — shared his analysis of the likely impact of today’s judgment.
“Positivity For The Entire Ecosystem”
RBI first issued its ban on banks’ dealings with crypto businesses back in April 2018, which took effect in July of that year.
In response to both public and industry-led petitions, a case combining pleas against the ban was brought before the Supreme Court by the Internet & Mobile Association of India (IAMAI), with hearings for the case held over two weeks this January.
As Raza outlined, today’s ruling means domestic banks will now no longer be able to deny their services to individuals, exchanges or start-ups in the industry.
“It’s a historic day,” Raza said, saying he believes that the ruling will bring “positivity to the entire ecosystem.”
Those on the sidelines of the industry will be emboldened by the court’s intervention, he said, adding that he expects new exchanges to launch, once-shuttered trading platforms to reopen, volume and registrations to rise.
In the medium term, Raza emphasized that crypto regulation in India remains in limbo. He referred to the government’s decision last fall to delay the introduction of a draft bill on a potential cryptocurrency ban to parliament.
This bill — entitled “Banning of Cryptocurrency & Regulation of Official Digital Currencies” — reportedly aimed not only to impose a complete ban on the use of crypto in India but also to pave the way for a state-backed “Digital Rupee” issued by the central bank.
“The finance ministry can still ban crypto by way of an ordinance,” he noted, “or present the bill to parliament. But it is highly unlikely.”
Facts, Not Fiction
While the future is not a foregone conclusion, Raza argued that RBI’s loss in the Supreme Court could well prompt the government to bide its time before jumping to introduce the bill.
One response, he ventured, would be for the government to convene a new committee to better understand and analyze the industry before making any further decisions.
As reported during the January hearings, IAMAI’s legal counsel had argued before the court that RBI had itself failed to properly research the matter before deciding to take action. “Opinion cannot be formed on imaginary grounds,” the counsel had said.
Raza told Cointelegraph he believes the government will now need to make more effort to gather its own material and verify facts on the ground, since:
“They know that once they will present the bill before parliament, again the people in India will move to court against it.”
To date, he noted, RBI’s negative stance — combined with uncertainty surrounding the postponed bill — had led to family members, friends and colleagues to regard those in the industry with some suspicion.
Today’s ruling will go some way toward combating the mistaken — and in Raza’s view, widespread — perception that crypto has already been banned in India. “Right now everyone is free to deal in crypto and use banking channels, it’s a great sign,” he said.
In an email to Cointelegraph, Sumit Gupta — co-founder and CEO of CoinDCX — characterized the Supreme Court hearings as a positive form of engagement with lawmakers and:
“An eventful and information-led opportunity for the cryptocurrency community to make its case known to our country’s decision makers […] to explain to them the nature of our industry […] and the positive effects the incorporation of cryptocurrencies in India could have on the economy.”
Could India Follow FATF’s Crypto Framework?
With the debate over crypto regulation in India set to resume, Raza argued that the government’s membership of the Financial Action Task Force (FATF) could play a decisive role:
“The FATF is pushing its members to introduce policies to regulate crypto and to know who is dealing in it. India’s government could go with the FATF and look to what other nations are doing in line with the FATF and follow their footsteps. Overall we’re very positive and believe the government should come up with guidelines very soon.”
The FATF is an intergovernmental organization established on the initiative of the G7 to promote the implementation of legal, regulatory and operational measures to combat money laundering worldwide.
Last summer, the organization issued updated guidance for Virtual Asset Service Providers (VASPs), including Know Your Customer measures, set to come into force this June.
Indian Crypto Exchange Adds Bank Transfers Hours After RBI Ban Lifted
An Indian cryptocurrency exchange has added support for bank account transfers, hours after the Reserve Bank of India (RBI) was forced to lift its cryptocurrency ban.
Mumbai-based CoinDCX announced Wednesday that users could now purchase cryptocurrencies with the Indian rupee, as the exchange became the first platform in India to fully integrate bank account transfers.
The integration came less than six hours after the Supreme Court of India ruled against a 2018 ban, imposed by the RBI, which banned domestic financial institutions from providing banking services to cryptocurrency companies.
Anirudh Rastogi, the founder and managing partner of Ikigai Law, the law firm which had filed the original petition on behalf of CoinDCX and other exchanges, commented that the judges’ decision was made on the grounds that there was little evidence to suggest cryptocurrencies posed a threat to the banking system.
The RBI ban was deemed not to be “proportionate to the risk sought to be addressed by such ban,” Rastogi said.
In a statement, CoinDCX co-founder and CEO Sumit Gupta said the court verdict would likely be the catalyst for a “transformation” in the Indian cryptocurrency industry.
A banking integration was the exchange’s “first priority” now Indian citizens could once again invest in digital assets, Gupta said.
“With renewed accessibility and convenience in purchasing cryptocurrencies, we believe that this change will have a dramatic effect in accelerating crypto adoption in India,” Gupta said.
It’s unclear whether the banking integration means CoinDCX has struck up a partnership with an Indian financial institution. The exchange did not immediately return requests for comment.
India Back In The Race: Landmark Judgment To Fuel Crypto Adoption
In what is widely being considered a historic day for the crypto industry as a whole, the Supreme Court of India has passed a judgment nullifying the controversial banking ban imposed by the Reserve Bank of India on the country’s local digital currency market.
The three-judge bench presiding over the matter — justices Rohinton Nariman, S. Ravindra Bhat and V. Ramasubramanian — stated in their joint verdict that the ban, which was issued as a precautionary measure by the RBI in order to “protect” the nation’s economy, had not been substantiated by any hard facts.
It is worth recalling that back in April 2018, the RBI — India’s central banking authority — had issued a circular asking the nation’s various banks and other financial intermediaries to stop their monetary dealings with any crypto-related businesses.
This imposition was regarded by many experts as unconstitutional but also beyond the general purview of the RBI. As a result, a number of prominent members from India’s crypto ecosystem came together to stand up against the unjust ban.
A case was brought forth before the supreme court by both the Internet and Mobile Association of India — a nonprofit organization seeking to expand and enhance India’s online and mobile value-added services sectors — and Ashim Sood, chief counsel for the association, who served as the Indian crypto community’s legal representative.
Sood is being widely praised for his efforts, especially for putting forth many pro-crypto arguments in front of the judge’s panel — a task that many experts believe could have only been carried out meticulously, since the information on digital assets is quite skewed among the Indian masses.
In an exclusive conversation with Cointelegraph, Sood stated that the recent judgment is not only fair and just but will most likely serve as the core basis for many future decisions regarding this emerging tech space, adding:
“The Supreme Court’s verdict is a call for responsible and balanced regulation — it encourages a fact-based empirical approach to cryptocurrency regulation. In the coming years, this judgment could serve as a beacon for decisions concerning emerging technologies and their effects.”
Loretta Joseph, a government affairs consultant at Medici Ventures, told Cointegraph on the sidelines of the London Blockchain Week that she welcomes the move to lift the ban, as it will help to establish a better regulatory environment:
“I think this opens up blockchain innovation. Entrepreneurship gives India the best opportunity now, because I think when you ban things, it’s not good, as regulation is very important. We need regulation and this industry needs regulation. But banning, it doesn’t help innovation and entrepreneurs start to do things that they can do without any recourse of the law.”
Lastly, just a day after the supreme court passed its judgement, Unocoin — one of India’s leading cryptocurrency exchange platforms — announced via Twitter that it had enabled bank account deposits and withdrawals in Indian rupees, thereby making crypto purchases available. It is expected that more exchanges will soon follow suit.
What Impact Will This Latest Verdict Have?
Following the reversal of the ban, many had expected the price of Bitcoin and other premier digital currencies to surge. However, no significant market shift has been observed as of yet. Providing his insights on the matter, Sumit Gupta, CEO of cryptocurrency exchange CoinDCX, told Cointelegraph that India’s crypto environment is set to undergo a massive transformation, since the nation’s existing peer-to-peer exchanges will now have the option of teaming up with legitimate banking partners, adding:
“We expect trading volumes to surge because, from our side, we are going to do our best to remove any doubts that people may have regarding cryptos. Also, global exchanges have been seeing huge potential in India over the past year or so. That is why they partnered with us even when the ban was in place.”
This sentiment was strongly echoed by Sidharth Sogani, CEO of Crebaco, an India-based analytics firm, who told Cointelegraph that owing to the simple fact that more than 50% of India’s current population is under the age of 35, it would not be surprising to see the adoption of crypto-enabled technologies increase dramatically in the coming few weeks.
India’s Economy All Set To Blossom?
Prior to the Reserve Bank of India’s nationwide banking ban, the country’s crypto economy was worth a whopping $12.9 billion. However, with the industry at large having grown leaps and bounds over the past couple of years, Gupta believes that this figure has most likely increased quite substantially. On the subject, he added:
“I think the Supreme Court has opened a much larger space for us which is only going to prosper from this point. We have always seen cryptos and crypto-based products as fuel to India’s current economic growth. You will see an ecosystem developing in this country that is going to flourish from all ends.”
It is also worth noting that the Indian Supreme Court is currently hearing another case that will most likely decide the nature of the regulations to surround the country’s digital currency market. In this regard, the judgment on reversing the RBI’s crypto trading ban weakens the case for stricter norms and so, it would not be surprising to see significant growth in Indian investor activity across the sector.
Expounding his views on the matter, Jamal Hassim, the founder and CEO of the BOLT.Global blockchain platform, told Cointelegraph that the crypto ban effectively stifled all innovation in the Indian crypto industry:
“A lot of start-up companies working in the space had ceased operations as did trading portals. More than the loss in trading, India lost the opportunity for critical innovation in the space, which is the key driver for utility, adoption and effective prices. We can expect an influx in both local and international companies trying to capitalise the new market. I wouldn’t be surprised if Facebook’s Libra project tries to re-start from India, considering the current opposition within the U.S.”
Lastly, Hassim believes that the re-entry of Indian traders will most likely bring in more volume as well as an increase in the market cap of premier crypto assets like Bitcoin or Ethereum. Furthermore, Binance CEO and Founder Changpeng Zhao told Cointelegraph that the local community will now likely see a greater exposure to crypto:
“This has been a landmark judgement giving the people of India a chance to realize their crypto dreams. […] Binance has already shown its commitment to the Indian people via WazirX, and we are looking to increase our exposure in the Indian cryptocurrency and blockchain scene to grow it even further.”
India’s Finance Ecosystem Is Primed For Advancing Crypto Innovation And Adoption
Prior to the blanket ban, India was seen as one of the largest crypto markets in the world — with exchanges like BitBNS and WazirX driving massive daily trade volumes. Now, with the passing of the supreme court’s latest judgment, a number of investors who had been seeking alternative avenues to traditional stocks and bond options will have the ability to add crypto assets to their portfolios.
Speaking on the monetary potential that the Indian crypto ecosystem currently possesses, Gaurav Dahake, CEO of the BitBNS crypto trading platform, told Cointelegraph:
“India is the hub for blockchain innovation and has the 2nd highest number of blockchain developers in the world. This judgment has opened up the market tremendously. There are investors that have already pinged us who would want to invest.”
Additionally, some in India previously thought that when the banking ban was imposed by the RBI, buying and selling of cryptocurrencies had become illegal. However, the central bank’s circular had only instructed banking institutions to refrain from facilitating any deals involving digital currencies.
Now, with the supreme court siding with the Indian crypto community, a lot of potential investors will be given the opportunity to buy crypto using traditional banking avenues — thereby providing the local industry with a new air of legitimacy.
Providing his views on the subject, Jagdish Pandya, chairman of BlockOn, a blockchain venture builder and venture capital firm, told Cointelegraph that in the coming few months, the Indian market will witness more and more people making use of crypto to encash, exchange and redeem their digital holdings:
“I foresee big product adoption and multi-channel integration via wallets like Paytm, Rapidz as well as many loyalty programs. Prices will grow upon adoption in Q3 and Q4.”
What Lies Ahead?
With the supreme court providing a lot of clarity in regards to the financial status of crypto within India, it is now quite clear that the banking ban was a bad decision on the RBI’s behalf, especially because a number of crypto and blockchain startups were forced to migrate to countries like Singapore, Thailand, and Malaysia following the ban — thereby adversely affecting the nation’s economy. WazirX CEO and Founder Nischal Shetty told Cointelegraph:
“This positive judgement will open doors to massive crypto adoption in India. It proves that we can now innovate, and the entire country can participate in the blockchain revolution.”
Also, the Indian government has taken a little more than two years to lift a ban that was widely perceived to be unconstitutional to begin with. Thus, it will be interesting to see how much time it now takes to create a regulatory framework to govern the local crypto market.
Last but not least, the supreme court’s verdict may see a number of scammers and miscreants make their way into the Indian crypto sector in order to take advantage of unsuspecting investors. As a result, a whole host of crypto pundits are eagerly waiting for regulations to be established, otherwise, if people lose their funds to scammy initial coin offerings, fingers will once again be pointed at Bitcoin (BTC).
Indian Crypto Exchanges Resume Fiat Services 24 Hours After Supreme Court Ruling
Major Indian crypto exchanges Unocoin and WazirX have resumed fiat deposits less than a day after the Supreme Court quashed restrictions on banks’ services to crypto firms in the country.
Unocoin, which claims to have been the first entrant into the Bitcoin space in India since its founding in 2013, has been described by local analysts as an “icon of the crypto industry.”
The exchange went live with rupee (INR) and bank account deposits and withdrawals earlier today, March 5, followed by INR deposits on Binance-owned WazirX.
Blockstream CEO Adam Back — the inventor of the hashcash proof-of-work system later used in Bitcoin’s (BTC) mining algorithm — immediately welcomed the news of Unocoin’s return to full services, tweeting: “Game on #bitcoin.”
The Industry Rallies
As reported, exchanges in the country had faced a moratorium on banking services since the central bank, the Reserve Bank of India (RBI), implemented its contentious ban on banks’ provision to crypto firms back in 2018.
Last year, amid increasing regulatory uncertainty for crypto in the country, Unocoin had been forced to lay off 50% of its staff. The platform has remained open since the RBI restrictions came into effect, yet suspended all fiat deposits in the summer of 2018.
Yesterday, RBI’s decision was reversed by a bench of three justices at the Supreme Court, who ruled that the ban was unconstitutional.
Hearings for the landmark case — filed in response to a flurry of public and industry-led petitions — had been held over two weeks this January.
Kashif Raza — co-founder of the Indian crypto regulatory news and analysis platform Crypto Kanoon — told Cointelegraph yesterday that the ruling was “historic,” believing it would bring “positivity to the entire ecosystem.”
Raza’s optimism appears to have been borne out swiftly, with fellow domestic exchange CoinDCX yesterday re-opening fiat services less than six hours after the Supreme Court ruling was announced.
Ashish Singal — hackathon star and co-founder and CEO of Indian blockchain payments startup CRUXPay — told Cointelegraph he believes the ruling will pave the way for “favorable regulations protecting all stakeholders” and prompt renewed interest in Indian crypto markets from national and international players alike.
Closing A Chapter On Tougher Times
While in effect, RBI’s ban had forced industry players to improvise strategies to continue to serve clients. In fall 2018, two of Unocoin’s co-founders were arrested for having opened India’s first Bitcoin (BTC) ATM.
This notwithstanding the fact that the machine had been specifically designed to not accept debit or credit cards in order to avoid any interaction with the banking system.
The controversial case — which had spiraled amid RBI’s moratorium and confusion as to the legal status of crypto in the country — eventually folded, with both colleagues released.
As positive momentum gathers pace, one further potential challenge remains for the legal and regulatory climate for crypto in India.
In fall 2019, the Indian government had opted to delay the introduction of a draft bill on a cryptocurrency ban to parliament in the 2019 winter session.
The bill would reportedly seek not only to impose a blanket ban on the use of crypto in India but also to pave the way for a state-backed “Digital Rupee” issued by the central bank.
Speaking to Cointelegraph yesterday, Raza nonetheless argued that he believes the government is more likely to fall into line with Financial Action Task Force guidance, rather than cement a hardline stance.
Reserve Bank of India To Appeal Supreme Court’s Crypto Decision
The Reserve Bank of India (RBI) is planning to file a petition against the recent landmark judgment made by the Supreme Court that nullified the controversial banking ban it imposed on companies transacting in cryptocurrencies.
According to a report by The Economic Times on March 6, the RBI is worried that the court’s decision could lead to cryptocurrency trading and put the banking system at risk.
Challenging The Supreme Court’s Decision
As Cointelegraph reported, on March 4 the Supreme Court nullified the RBI’s blanket ban on banks dealing with crypto businesses. The central bank had initially enforced the ban in July 2018.
This led to petitions from industry players and public alike, until the challenge was brought to the Supreme Court by the Internet & Mobile Association of India (IAMAI), a not for profit industry body representing internet consumers and investors.
The Supreme Court’s decision to overturn the ban followed two weeks of hearings in January this year. The RBI will now seek a review of this ruling.
No Proof That The Banking System Is At Risk
The RBI’s concern that this may result in cryptocurrency trading may already be moot, as many Indian cryptocurrency exchanges already resumed fiat deposits and withdrawals within 24 hours of the ban being lifted.
However, the court ruling stated that RBI had not conclusively shown that cryptocurrency trading was damaging. Unless it can do so, the Supreme Court is unlikely to alter its decision, despite the central bank’s protests.
The central bank may also face another issue, as many companies were forced to cease trading after the ban and may seek compensation. As Abhishek Rastogi, a lawyer representing one of the cryptocurrency platforms explained:
“The Supreme Court may look at the RBI’s review petition but as of now the cryptocurrency platforms can operate in India. Many companies have even gone bankrupt after the RBI’s diktat and they may also look to initiate action in this regard.”
India’s Crypto Industry Still Threatened by Ban As Pending Bill Looms
A pending bill may still inhibit cryptocurrencies from flourishing in India, with India’s parliament yet to rule on the “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill” from 2019, Business Insider reported on March 7.
If passed, the bill will introduce unique regulatory frameworks for virtual currencies, utility tokens, and commodity-backed tokens — likely creating a complex exclusionary legislative apparatus for blockchain businesses to navigate.
Supreme Court Repeals Reserve Bank Of India’s Crypto Ban
On March 4, India’s crypto community rejoiced as India’s Supreme Court ruled that the Reserve Bank of India’s (RBI) ban was “disproportionate and unconstitutional.
The circular had prevented financial institutions from providing banking services to companies operating with cryptocurrency. The ban had been in place since April 2018, and targeted companies offering “any service in relation to virtual currencies.”
Less than 24 hours after the restrictions were repealed, several Indian cryptocurrency exchanges had already resumed fiat deposit services — including Unocoin, Wazirx and CoinDCX.
In response to the repeal, HashCash consultants also announced it would invest $10 million into India’s crypto industry this year.
India’s Crypto Industry Not In The Clear Yet
In addition to the hostile bill from 2019, India’s crypto community will have to also overcome an appeal from RBI in the Supreme Court regarding the repeal of its circular.
Citing anonymous sources, The Economic Times reported on March 6 that RBI is concerned that widespread virtual currencies could put India’s banking system at risk.
Sohail Merchant, a member of the Internet and Mobile Association of India’s Blockchain and Cryptocurrency Committee, stated that despite hostility from lawmakers toward crypto, the main objective of the Indian blockchain industry stakeholders is “to create a dialogue with policymakers and develop a comprehensive framework for crypto assets in India paving the way for innovation.”
Crypto Ban Drives Indians To The Dark Web
Despite the RBI ban on cryptocurrencies, a recent study by Statista reveals that India’s population has the highest per-capita usage of darknet platforms worldwide.
The report shows that 26% of 23,227 respondents between the ages of 16 and 65 have used technologies that facilitate access to the dark web — more than twice the global average of 12%.
RBI Says No Restrictions On Banks Providing Accounts To Crypto Traders
RBI’s recent response to an information request shows that Indian banks are not prohibited from dealing with cryptocurrency business.
India’s central bank, the Reserve Bank of India, seems to finally be clarifying its stance on financial services for cryptocurrency-related businesses.
In response to a right to information request, the RBI clarified that there are no restrictions on banks preventing them from providing an account to cryptocurrency companies or traders.
The request was initially filed by Harish BV, a cofounder of local cryptocurrency exchange Unocoin.
The Supreme Court’s Decision On The Crypto Ban Wasn’t The End
In 2018, the RBI released a statement restricting all regulated entities including banks from dealing with any organization or individual traders transacting in cryptocurrencies. After the ban, many companies and traders also received warning statements from their respective banks advising them to either stop their cryptocurrency activities or have their accounts suspended.
Things have since improved as in early March, the Supreme Court lifted RBI’s ban on financial entities from dealing with crypto-related customers.
However, uncertainties still abounded regarding whether banks could support accounts for such customers. Earlier this spring, some banks were reportedly still refusing services to crypto businesses.
Local fintech lawyer Mohammed Danish previously stated that the Supreme Court’s ruling on the ban did not include an order for the RBI to notify banks and request their compliance with the court order.
To clarify traders’ concerns as to why banking portals still prohibited transactions in virtual currencies, Harish BV filed an information request on April 25, asking the financial regulator if it still prohibited any banks from providing bank accounts to cryptocurrency companies or traders,
In response, the RBI wrote, “as on date, no such prohibition exists.”
Crypto Is Now Open To 1.35 Billion People
After RBI imposed the banking ban on cryptocurrencies, most Indian blockchain and cryptocurrency startups registered themselves in countries with crypto-friendly regulations while still operating from India. Some of the most established Indian crypto businesses were either forced to close shop or move to a different country.
Harish BV told Cointelegraph that now that the RBI’s stance is crystal clear, the blockchain and cryptocurrency industry can flourish in India, opening digital assets to 1.35 billion Indians:
“After Supreme Court scrapping RBI’s Ban on crypto and RTI’s reply from RBI, it is clear that there is no need for any blockchain or crypto company to register out of India.”
Indian Banks Still Cryptophobic Despite No Banking Prohibition
Here are the legal resources available to Indian crypto users and businesses if a bank has declined services out of cryptophobia.
In a recent response to a Right to Information query, the Reserve Bank of India, the Indian central bank, has stated that there is no prohibition on banks to provide bank accounts to cryptocurrency traders. But some banks have been arbitrarily denying services to crypto users and are still doing so. If there is no law banning crypto trading, as emphasized by India’s Supreme Court, and there is no prohibition on banks by the RBI, then why aren’t banks treating crypto-related activities on par with other legitimate activities?
The RBI banking ban on crypto was set aside by the Supreme Court on March 4, 2020. In its detailed judgement of over 180 pages, the Supreme Court stated that the RBI action is extremely disproportionate in severing the lifeline (banking services) for cryptocurrency trading business despite crypto trading not being illegal under any Indian law and no harm or damage is proved to have been caused to these banks as a result of their relationship with crypto exchanges. Thus the judgement, without speaking any good or bad about cryptocurrency, rendered the legality of crypto back to its erstwhile status as it was before the RBI’s ban: a state of regulatory vacuum.
Has The Judgement Provided Any Relief To Crypto?
The judgement was celebrated by Indian crypto enthusiasts as rainfall after a drought. However, it has not eradicated the banks’ hostility toward crypto, as most banks so far have refused to mend their ways. Various news reports have given accounts of individual crypto users being denied services by banks in one way or another. Here are some instances:
* Freezing And Closing Bank Accounts For Conducting Peer-To-Peer Sales And Purchases Of Crypto
* Rejecting International Debit Or Credit Card Payments For Purchasing Crypto
* Blocking International Wire Transfers When The Source Of Funds Is Cited To Be A Crypto-Related Business
In denying these services, the banks claimed that they are waiting for an RBI update in light of the Supreme Court’s judgement, but the absence of corresponding legal obligation of the RBI to issue any such update renders this excuse totally unreasonable. In contrast, some banks are indeed providing services to crypto exchanges, although sometimes with a withdrawal restriction. Considering the RBI’s recent response to the Right to Information query stating simply that there is no prohibition on banks as well as the fact that banks are expecting updates from the RBI, one thing is clear: The RBI is not particularly interested in breaking the current state of confusion.
Where Do We Stand Today?
As the situation stands today, the two cases seeking regulation or ban on crypto are still pending in the Supreme Court. The government has been consistent with its stance in court to introduce the infamous Crypto Banning Bill in the Parliament of India, which prescribes 10 years imprisonment simply for holding cryptocurrency, among other things.
In every hearing of the pending cases, the government must put together a reason to justify its delay in deciding on the nation’s regulatory framework. It would be wishful thinking to believe that the constant pressure for a response exerted on the government would not render the situation even worse for crypto, as it might lead to hasty decisions.
Also, it must not be ignored that the Supreme Court’s verdict has put the RBI in an even better position to interfere with the cryptocurrency sector. In one of the findings, the court recognized that the RBI has the power to not only regulate but also prohibit cryptocurrency, given its resemblance to money.
Along with its best efforts to be compliant with existing laws on foreign exchange, money laundering and income tax, it is the need of the hour that the Indian crypto community starts making individual and collective moves against this arbitrary and unjust conduct of the banks, rather than taking a passive approach.
What Is The Legal Recourse Against Banks?
Three Remedies Are Outlined Below:
Complaint To The Rbi Ombudsman:
This is the easiest remedy provided under RBI’s Ombudsman Schemes, and is cost-free. You can simply visit the RBI website and file a complaint. Questions like how to file, where to file and what documents are required are all answered on the website.
The complaint can either be against a bank such as the State Bank of India or ICICI Bank, or a payment system like Paytm or Google Pay, addressing the grievances cited above. It is important to note that two separate schemes — one for banks (Banking Ombudsman Scheme 2006) and the other for payment systems (Ombudsman Scheme for Digital Transactions 2019) — are available on the website. Clause 8 of both schemes detail the acceptable grounds of filing a complaint. It is recommended to read the relevant scheme carefully before filing the complaint.
Complaint To The Consumer Forum:
A bank customer can file a complaint under the Consumer Protection Act of 2019 for any deficiency in service. Based on the value of the compensation claim, a jurisdiction of District Commission (up to 10 million rupees), State Commission (up to 100 million rupees) and National Commission (above 100 million rupees) can be invoked accordingly.
This remedy is warranted if a customer has suffered losses due to a bank’s deficiency, e.g., if a bank has unjustly frozen funds on invalid grounds that resulted in monetary loss.
Writ Petition Under Article 226 Of The Constitution Of India:
Public sector banks are rarely accused of denying services for crypto-related activities. Mostly, it has been the private banks showing reluctance. Filing a writ petition before the High Court under Article 226 is the most effective remedy that can bring relief in the most expeditious manner once and for all.
Although writs are generally maintainable against the government and its authorities that fall in the definition of “state” as provided under Article 12, in exceptional cases, Indian courts have also upheld writs against private bodies by applying a “doctrine of public function.”
The denial of services by banks for crypto users is absolutely without any statutory backing or regulatory guideline, which is a blatant violation of the principle of nondiscrimination. In fact, this arbitrary exercise of discretion by banks is tantamount to assuming power with which they have not been conferred. Thus, a writ can be maintainable against private banks as well.
While freezing or closing bank accounts and blocking transactions, the banks have communicated to crypto users and traders that they are awaiting an RBI update in light of the Supreme Court’s judgement. However, when nullifying the ban, the Supreme Court emphasized that there is no law prohibiting cryptocurrency trading and additionally recognized banking services as a lifeline to crypto business activity. Thus, these communications from banks can also be used to call upon the RBI to clear the haze.
Moreover, the recent RBI response to the Right to Information query further highlights that there is no prohibition on banks to provide services to crypto traders. In spite of the aforesaid position, the rebellion shown by some banks is unfortunate and is a matter of serious concern that needs to be addressed with high priority.
Set To Grow, India’s Crypto Industry Must First Toil Tough Ground
Several factors make India the hallmark country for crypto adoption. Experts, however, agree that several challenges still stand in the way.
Over the past few months, India’s cryptocurrency market has continued to be in a constant state of flux. From crypto bans imposed by the country’s central bank to a historic ruling by its Supreme Court to lift that ban, for most onlookers it appears that India’s crypto market has experienced a rebirth.
A recent industry report put together by exchange OKEx and research platform Coinpaprika indicates that the crypto space in India is set to soar to greater heights, especially because the country leads the globe in terms of remittances, not to mention that it has a national fiat currency that is depreciating and unstable. The report also highlights a loosening government policy as one of the factors boosting the adoption of cryptocurrencies in the country. While sharing his point of view with Cointelegraph, Jay Hao, the CEO of OKEx, told Cointelegraph:
“India has always been a vibrant market for cryptocurrencies due to several different factors yet its growth has been stunted by regulation since 2018.”
However, now that the Supreme Court of India has moved to lift the 2018 ban, the report shows an uptick in the volume of cryptocurrencies being traded on India’s local exchanges. Even exchanges outside the country, such as OKEx, have experienced higher numbers of crypto traders.
What Makes India Ripe For Crypto Adoption?
To begin with, India has the world’s largest population outflow. In a country that features a population with strong family bonds, India’s large population of immigrants can generate enormous demand for remittances to the nation.
According to reports, more than 17 million immigrants sent money back to the country in 2019. Furthermore, remittances by Indian immigrants have ranked at the top globally since 2008.
A World Bank estimate shows that an estimated $83 billion was sent by Indian immigrants back to the country in 2019. In a conversation with Cointelegraph, Sumit Gupta, the CEO of CoinDCX – a crypto exchange based in India — confirmed that “since 2008, India has overtaken China as the world’s top recipient of migrant remittances.”
However, while the cost of large remittances remains relatively low, including those made to facilitate intercorporate investments or aid, fees for remittances made as small personal transfers are high. Furthermore, the lofty remittance fees in most African countries have raised the global average fee to about $7.40, according to reports.
Even though reports show that India’s remittances fees sit slightly below the global average, high demand makes the Indian market ripe for a cheaper and faster alternative. For most market watchers, cryptocurrencies are the next best way to cut fees. Hao further explained that the 17 million Indian immigrants sending money back to the country “are paying very high fees in transactions and conversions.” He added:
“Using cryptocurrencies like BTC or XRP could save Indians a huge amount of money on fees, yet the market is largely yet to be exploited due to the RBI’s previous ban on cryptocurrency.”
Hao’s statements are echoed by Gupta, who believes that “remittances are one of the strongest use cases for cryptocurrencies.” He added that “with almost instantaneous transactions and low fees, Indians will surely benefit from the use of cryptocurrencies when moving money across borders.”
India’s Unstable Currency
Experts also agree that another factor set to increase demand for cryptocurrencies in India is the country’s unstable fiat currency. Hao explained that “the Indian Rupee is less stable than ever and the exchange rate with the USD continues to rise.”
The depreciation of the rupee is caused in part by the U.S. Federal Reserve’s consistent interest rate hikes of the dollar before the COVID-19 pandemic, leading to increased demand for the dollar worldwide. Also, the Reserve Bank of India’s efforts to support a weakened economy as a result of the pandemic have destabilized the currency.
According to Hao, the depreciation of the rupee will lead “to a constant depreciation of Indians’ savings and a need to convert their Rupees into a more-stable fiat currency to shield their wealth from inflation.” Once again, with existing strict foreign exchange regulations that make it difficult to directly exchange rupees for more-stable dollars, Hao explained in his statement that demand for peer-to-peer crypto platforms will emerge as a solution to converting rupees to Bitcoin (BTC) then to dollars.
Supreme Court Ruling
Since 2018, India’s crypto industry has been held back by a cryptocurrency ban that prohibited banks from offering financial services to crypto-related companies. However, the Supreme Court of India issued a historic ruling in March that consequently loosened the government’s stance on cryptocurrencies.
Even though there have been reports of some banks refusing to offer banking services to crypto firms due to the lack of regulatory clarity, the loosened policies have increased crypto trading volumes in the country. Despite the pandemic that has shaken various industries, the crypto industry in India has had a resurgence. Gupta confirmed this, saying:
“Despite the ongoing global economic downturn caused by the Covid-19 pandemic, the cryptocurrency industry in India has been experiencing a resurgence in user demand and the spike in trading volumes.”
The report by Coinpaprika and OKEx also echoes data from SimilarWeb but specifies that there was a 4,100% increase in new user registrations from India on the OKEx exchange. According to the report, Kraken, Bitstamp and Bitfinex also fall among the exchange platforms that have seen high interest from India since the lifting of the ban in March.
“Indian crypto industry is seeing more participation from individuals and as user sign-ups continue to breach new levels, there are fresh investments in growing exchanges like CoinDCX,” according to Sharat Chandra, an India-based blockchain speaker and startup consultant. “The exchanges want to use the fund infusion to spread literacy around digital assets and increase adoption of cryptocurrencies,” Chandra added.
What Needs To Be Done To Boost Growth?
Even as Indian talent overseas continues to bring in an increased inflow of remittances to the country, not to mention the Indian government moving to relax its previously harsh stance on crypto, there are still several hurdles in the path of growth for the country’s crypto space. Hao pointed out that “despite the lifted ban, regulatory policy is still vague and many major banks still decline processing crypto transactions.”
There are also fears among market analysts that with more open foreign exchange rules, most Indians using crypto as a conduit for exchanging rupees to more-stable dollars might find the entire process unnecessary, thus leading to a decline in the growth of the industry going forward. However, while Hao sees the dark side of the matter, he also highlighted a silver lining:
“India’s young and tech-savvy population and the sheer number of people who live there, give the country all the hallmarks of being one of the world’s major cryptocurrency markets.”
As a solution, Hao proposed the adoption of stablecoins in the country as a way to nurture and grow the developing industry. He said that “there is plenty of space for stablecoins in India to help them [Indian immigrants] convert and move funds more quickly and easily.”
On a different subject, CoinDCX’s Hao proposed improved access to the internet as a possible solution to the increasing growth of India’s crypto industry. Gupta pointed out that the favorable Supreme Court verdict has drawn the attention of many Indians to the benefits of cryptocurrencies. Besides, he said that the pandemic has resulted in Indians spending more time at home and learning how to engage in crypto trading.
Toward The Sustainable Growth Of Crypto Adoption
As Gupta put it, there are “several factors that set up India as a potential bastion of cryptocurrency adoption.” If crypto trading volumes and the overall interest in crypto in the country are anything to go by, the Supreme Court of India’s move to overturn banking restrictions on crypto firms was the missing link that now adds a layer of credibility to the industry.
To tap into its crypto market, large-scale trading companies are setting up shop in the country or developing products that cater to the Indian market. OKEx, for instance, plans to launch a P2P trading platform where traders will be able to buy cryptocurrencies such as Bitcoin or stablecoins using rupees. Highly ranked exchanges such as Kraken have also announced plans to expand further into the Indian market this year. In addition, at the tail end of 2019, Binance bought the exchange WazirX, placing a foot inside the country’s market.
Apart from remittances, an unstable rupee and regulatory clarity as factors set to contribute to the growth and development of India’s crypto industry, Chandra mentioned that the introduction of leading decentralized finance products can spur the growth of the country’s crypto industry: “Financial institutions to explore Defi and come up with new usage-based personalized products.”
Indian Government Again Proposes Blanket Ban on Cryptocurrencies
Three months after the Supreme Court ruling to lift the banking ban, India’s Ministry of Finance has proposed to ban cryptocurrencies by law.
The Indian Ministry of Finance has proposed to legally ban cryptocurrencies within the subcontinent. With this, the Indian crypto community is met with yet another unexpected turn.
The proposal will first be sent to the Union Council of Ministers and then be forwarded to the parliament for final review. The Economic Times report quoted a senior government official:
“A note has been moved (by the finance ministry) for inter-ministerial consultations.”
Only three months ago, the Supreme Court of India overruled the Reserve Bank of India’s ban on banks providing services to individuals and companies dealing in cryptocurrencies.
A Blow To The Crypto Dream
Last year July, a high-end government panel, headed by India’s former finance secretary Subhash Garg, had drafted a law to place a blanket ban on cryptocurrencies. It proposed to subject crypto users to a jail term of up to 10 years and/or a fine of up to 25 crore rupees ($3.2 million). The draft read:
“No person shall mine, generate, hold, sell, deal in, issue, transfer, dispose of or use cryptocurrency in the territory of India.”
Very little was subsequently heard regarding that proposal from any government official.
The new proposal has again inflicted fear in the Indian crypto community. While much enthusiasm was seen in the crypto space in the past three months as new startups sprouted to push crypto adoption across the nation, this proposal could be a hard blow to all businesses and individuals involved in the space.
Companies such as Binance and OKEx that have been expanding their foothold across India would have to pull back.
Speaking to reporters, an official of corporate advisory firm AKM Global said that if the law were to be passed as it was drafted last year, it “would completely decimate the crypto-industry in India.”
There’s much to be revealed regarding the proposed law, as no clarifications have so far been provided about what restrictions they might include.
India’s Rumored Crypto Ban May Be Overblown, Say Industry Pros
Rumors that India might be considering a new ban on crypto may be premature, according to exchange founders and startup CEOs working in the sector.
Indian news site The Economic Times created a stir Friday by suggesting lawmakers in India, where the Supreme Court overturned a punitive banking ban from the Reserve Bank of India (RBI) only four months ago, were planning on slapping a new ban on crypto companies.
The article, titled “With a law, India plans lasting ban on crypto,” cited one unnamed “senior government official” who told The Economic Times, “A note [presumably on crypto] has been moved (by the finance ministry) for inter-ministerial consultations.”
The article doesn’t provide any information on what the note could be but says it was spurred on by the Supreme Court ruling, which allowed crypto exchanges to finally access banking services after nearly two years stuck in the wilderness.
The article said the government could lean on a previous government draft law, from July 2019, that proposed all forms of cryptocurrency be banned, with anyone caught holding them facing up a fine and up to 10 years imprisonment.
But Is There Any Substance To This?
Well, the report in question relates to one published by a government panel, chaired by former Economic Affairs Secretary Subhash Chandra Garg. While the report recognizes blockchain technology is an “important new and innovative technology,” it notes, “with serious concern,” that the use of cryptocurrencies in India is “mushrooming” at an alarming rate.
Highlighting that many crypto assets don’t have any intrinsic value and supporting the RBI ban, the report concludes: “The Committee has recommended a law banning the cryptocurrencies in India and criminalising carrying on of any activities connected with cryptocurrencies in India.”
The only exception, they say, would be a digital currency issued by the state itself.
Speaking to CoinDesk, Nischal Shetty, the founder and CEO of WazirX, a local exchange acquired by Binance late last year, said a blanket ban on crypto wasn’t what he was seeing.
“This is all leaked information,” Shetty said. “There is movement for sure, but no one has been able to get clarity on whether it specifically talks about a ban, or whether it talks about just moving forward with regulation. There are a lot of assumptions.”
Based on his own government sources, Shetty said he believes the Finance Ministry is consulting with other government departments to determine what the next regulatory step should be.
“I’ve personally met people in government, right, ministers in Parliament, and what I’ve seen is they’ve been very positive about regulating,” Shetty said. “Some of them have been very vocal that a ban is not the solution because they understand technology … they understand that banning a technology is not a solution.”
The original draft bill from the Garg committee – which has long since been wound up – is still floating in the Finance Ministry and Shetty agrees it could form part of the “default content” when determining how to move forward with crypto regulation.
“Someone from the Finance Ministry has proposed that they should consider looking into cryptocurrencies and figuring out what to do, either to ban it, or to regulate it,” Shetty said, as the lifting of the RBI ban has made this a priority for officials. “[The government] wants to see progress and regulations,” he added.
But, he points out, the idea of reaching out to other departments is in order to take in other viewpoints. Citing Bloomberg Quint’s appraisal of the note, Shetty highlighted: “if in any way, they [the Finance Ministry] get pushback that a ban is not the right way approach, then they would set up another committee, which would explore [crypto] regulation.”
“I see this as a positive step,” he continued, “there is no clarity in India today. It’s a good thing that someone is taking the initiative.”
Shetty’s thoughts have been echoed elsewhere.
A spokesperson for the Bangalore-based exchange CoinSwitch said, “the report has no mention of the particular government body responsible for such actions or contains quotes from reliable sources. As such there is a lack of clarity and until further details reveal we would carefully monitor the situation.”
Similarly, Sumit Gupta, the co-founder and CEO of CoinDCX, one of the country’s largest exchanges, told CoinDesk in an email that “reconsidering past bills is likely part of the process of forming clearer regulations around the use of cryptocurrencies within India.”
Gupta noted the lifting of the RBI ban has led to record trading volumes and user adoption, calling recent growth in the sector “unprecedented.”
CoinTelegraph reported earlier this week there has been a flurry of new exchanges launching in India, as well as a wave of outside investment from global players, including OKEx and Binance.
“Given the previous open-mindedness of government officials and regulators in the Supreme Court case, where they were willing to engage with cryptocurrency sector leaders in dialogue about the future of the industry – we are confident that a similarly communicative approach will be taken in making this decision,” Gupta said.
Among some of the existing industry players in India’s crypto scene, a consensus is building around starting more formal dialogues with officials. There’s already an active crypto-related trade body within the Internet and Mobile Association of India, which helped challenge the RBI ban.
Shetty said WazirX was looking at creating a self-regulatory framework.
“We have to show our government on why we are already practicing KYC [know-your-customer verification] and all the standard practices in India as exchanges,” he said. “I think a formal regulatory note from us would be helpful in going in the right direction.”
CoinDesk reached out to the India’s Finance Ministry for comment but did not receive a response by press time.
Indian Banks Act Slow To Accept Crypto Industry Despite RBI’s Approval
Indian banks are reluctant to work with crypto firms, even though RBI clears the air.
The repeal of a blanket ban on cryptocurrencies in March by India’s central bank, the Reserve Bank of India, has been a boon to the thriving crypto industry in India — with the launch of new exchanges being a catalyst.
This is despite the country being one of the most severely affected nations by the COVID-19 pandemic, which has led to a deepening economic crisis across the nation. For investors and fintech innovators alike, cryptocurrency and blockchain technology have proven to be a much-needed respite in these challenging times.
Repealing the blanket ban was not the ultimate solution that most had hoped it to be, as even after the repealing, there have been incidences of banks declining to process crypto transactions. However, there is more regulatory clarity in the industry now than there was back in 2017 when the degree of skepticism and confusion was at a high level.
A rumor of a note that was moved within the Ministry of Finance for intradepartmental consultation regarding a draft law that sought to ban all cryptocurrency-related activity — with a heavy fine or even a jail term of up to 10 years for offenders — had been swirling around, but it has recently been debunked.
Corporate advisory firm AKM Global said that if the law gets passed in its current form, it “would completely decimate the crypto-industry in India.” This rumor brought back fears to the crypto community. However, Nischal Shetty, the CEO of crypto exchange WazirX, maintains faith in the government, telling Cointelegraph in an email exchange:
“On the day the news about the ‘note’ broke out, it created some panic among the community. But that’s all. We are not seeing any difference in the trading behaviour on WazirX since then. There have been speculations about crypto ban in the past as well.
With more than 5 million crypto users in India, I’m confident that our Prime Minister won’t let us down.”
This positive outlook about the governing bodies is not shared by all experts in the industry. Siddharth Sogani, the founder of Crebaco — a research, rating and intel company for blockchain — fears the inadequate dissemination of knowledge within the governing bodies and iterates the need for a separate committee:
“Our government released the draft bill on crypto which was made by interns of National Institute of Financial Policy and Planning, without consulting even one industry or subject matter expert. There are several aspects to be taken care of while making policies in India. […] A dedicated government body should be there which regulates this industry, without that it is impossible to regulate crypto in India.”
Reluctance By Banks
In addition to the RBI, a few private banks have been reluctant to process crypto transactions for various firms in the industry.
However, there is wide speculation as to why that is; it could just be a lack of understanding and knowledge of the industry as was seen with governing bodies. There might be, however, a deeper conflict of interest at play here. Sogani said: “Banks will always be against this industry globally because if crypto comes in action, P2P transactions will eliminate the need of third party bankers.”
In a more positive light, the skepticism of the banks could also be a function only of the limiting circumstances that they are subject to due to the lack of regulatory clarity maintained by the governing bodies like the RBI, according to Sogani:
“Banks in India are unclear how to treat Bitcoin transactions. They clearly don’t want to get their hands dirty when crypto regulations are not in place. Also, RBI had not removed or issued a new circular which tells the banks to start working with crypto companies again.”
However, in response to a right to information request filed by Harish BV, the co-founder of a local cryptocurrency exchange Unocoin, in late March, the RBI clearly stated that there are no restrictions on banks providing accounts to crypto firms and individual traders. This was the big RBI statement that banks were supposedly been waiting for, but the real quantitative impact remains to be seen.
Perceptions: Blockchain vs. Cryptocurrency
Blockchain technology, cryptocurrency and transparency are what ledger technology offers and should ideally be a no-brainer for India where corruption and bribery are rampant, penetrating all walks of life. However, this potential has been marred by the lack of understanding and distorted portrayal of the facts by the mainstream media with a focus on the illicit activities that originate on the darknet.
In India, blockchain technology has been embraced in various economic sectors like education and trade. Therefore, it is evident that the unique selling points of blockchain technology are being implemented, but skepticism surrounding cryptocurrency still exists. Elaborating on this, Gaurav Dahake, the CEO of crypto exchange Bitbns, stated:
“There’s confusion in terms of understanding the whole sector. Blockchain is good, cryptocurrency is bad seems to be the overall understanding, and traditional media has blown things out of proportion. Concerns revolve around money laundering, use in illicit activities. We as exchanges have tried addressing this.”
With all factors surrounding governance and regulatory bodies considered, it’s important to remember that blockchain technology is a disruption to the stipulated growth of the financial markets.
Thus, it’s ideally not meant to co-exist within the rules, according to Sogani: “Crypto industry, specifically Bitcoin and its surrounding ecosystem, is designed to be above the regulators. Even when the RBI blanket ban was in force, P2P exchanges were blooming.”
In the absence of a proper regulatory framework, exchanges and other major players have been stepping up to self regulate and/or contribute to the policy framework, like Ripple’s recent proposal. Dahake further added: “We follow almost 60% of things that are usually prescribed to brokers or trading exchanges.”
With the RBI’s statement that there is no prohibition on banks to deal with crypto firms and traders, there is now a clear message to a demographic of 1.3 billion: There are no legal issues with holding and transacting in this asset class.
The sheer enormity of the demographic is bound to have a significant impact on the global crypto industry, whose major players will look to invest and drive business in India. The RBI, the government and crypto firms will need to work together to sustain the growth seen in 2020.
Volumes And User Growth
Indeed, the crypto industry seems to be growing. The increase in interest is measured in terms of volume and the number of users in the leading cryptocurrency exchanges in India like WazirX — which was acquired by Binance in late 2019 — Bitbns, CoinDCX, just to name a few. Shetty told Cointelegraph that WazirX’s daily trading volumes have increased 10 times compared to pre-lockdown volumes, adding:
“The Indian crypto ecosystem has been rapidly growing ever since the Supreme Court struck down RBI’s banking ban. We’re seeing a steady growth in user signups every month. In fact, the Indian crypto industry is very optimistic about crypto’s future.”
Apart from the validation the industry received when the blanket ban was lifted by the Supreme Court, one of the integral reasons for this growth is the diminishing returns of the traditional capital markets.
BSE Sensex and Nifty 50, indices that are considered to be representative of the country’s stock market and general investor sentiment, are both down approximately 15% this year despite the country’s stock markets rallying in May and June.
This superiority in return has also been observed when comparing the returns of Bitcoin to the Indian rupee against the popular asset classes in India, such as gold and fixed deposits. According to Dahake in an email conversation with Cointelegraph, this crash in market assets has forced investors to look for other avenues of returns in their portfolios, and crypto assets have answered the call, showing much higher returns than other asset classes:
“Equities return for 3 years is negative. FD returns have gone down from 8%–9% to 5.5% now over the last 5 years. Rupee has depreciated by over 20% with respect to the dollar in the last 2 years and by over 100% in the last 12 years. Bitcoin as a whole has outperformed massively all of these asset classes. So users are interested in diversifying into Bitcoin.”
Another reason for this growth is the dissemination of crypto education that has happened during the rigorous lockdown.
Traditional investors have found the inclination to educate themselves about the cryptocurrency market due to the equity market crash, and rudimentary investors have found time to learn about the basics of blockchain technology and cryptocurrency to enable themselves to make more lucrative investments than those available in the traditional capital markets.
Indian Government Actively Working Toward New Crypto Ban
Five months after Indian courts lifted the blanket ban on crypto, an official said the government is considering a new law banning crypto.
An Indian government official has claimed that two ministries and the Reserve Bank of India are actively working on a legal framework to ban cryptocurrencies on the subcontinent.
According to an Aug. 4 report from Indian news website Moneycontrol, authorities in India are making preparations to pass a law banning cryptocurrency trading.
The site quoted an anonymous official as saying that consultations between the Ministry of Electronics and Information Technology, the Ministry of Law and Justice, and the Reserve Bank of India had begun regarding the framework of such a law.
“Once Parliament resumes for the session, we are hoping to get [the law] ratified,” the official said. Parliament is expected to reconvene in late August or early September.
The official stated that the government was considering banning crypto through legislative change — rather than methods such as the blanket ban from the RBI for banks dealing with crypto firms — because it would be more binding. “It will clearly define the illegality of the trade,” the person said.
Laws On Cryptocurrencies
In March, the Supreme Court of India struck down a blanket ban on banks dealing with crypto businesses that had been imposed by the RBI since July 2018. The repeal led to a boom in new exchanges across the country.
However, government officials have been floating the idea of enacting a new law not allowing cryptocurrencies in India in place of the RBI ban.
Ashish Singhal, founder and CEO of Indian cryptocurrency exchange CoinSwitch, said that the chances that the government would impose a blanket ban on digital currencies were more likely in 2019 than this year.
He said there has been a change in the way crypto is perceived across India, hopefully for the better.
Crypto Refuge During Lockdown
Though many parts of India still face some restrictions on movement due to the pandemic since a lockdown was ordered in March, crypto exchanges in the country reported strong growth as some investors moved away from traditional assets.
Cointelegraph reported in May that India-based exchange CoinDCX had ten times the average number of users sign up in the week after the RBI ban was lifted as well as 47% growth for Q1 2020.
Trading platform WazirX also recorded a month-on-month growth of over 80% in both March and April. Additionally, United States-based crypto exchange Coinbase entered the Indian market, offering crypto-to-crypto conversions and trading services from April onward.
Moneycontrol said that “millions of dollars worth of business in cryptocurrency is being done every week, with the lockdown pushing up the volumes.”
“A growing number of investors have found refuge in virtual currencies as traditional assets have taken a beating over worries about the health of the economy battered by the coronavirus outbreak.”
Fresh Reports Of Indian Crypto Ban Are ‘Clickbait,’ Says Local Source
Local sources speculate on the possibilities of a cryptocurrency ban in India.
The draconian bill introduced by the country’s former finance secretary Subhash Chandra Garg in 2019 to ban cryptocurrencies in India haunts the country’s crypto enthusiasts and entrepreneurs to this day.
Reports from Bloomberg and the local news outlet Economic Times about the further development of the bill and the possible introduction of it as law has only caused more panic and anxiety within the crypto community.
These reports have always cited “people familiar with the development” as saying that the bill will be discussed shortly by the federal cabinet before being sent to the parliament for consideration. The same statements seem to have been doing the rounds since early June.
Without any additional information, these reports suggested a high possibility of a ban on cryptocurrencies in India.
There is, however, as much uncertainty regarding the bill today as there was a year ago. The only thing that has changed — that too in the favor of the Indian cryptocurrency industry — is that in March the Supreme Court struck down the Reserve Bank of India’s circular banning financial institutions from dealing with cryptocurrency companies and traders.
Subramanian Swamy, the ruling party’s member of Parliament of the Rajya Sabha, the Indian Parliament’s upper house, tweeted about the ban’s repeal saying, “SC allows cryptocurrency trading, cancels RBI’s 2018 circular.”
Swamy was also quoted by a local news outlet as saying that “cryptocurrency is inevitable.” Further refuting the claims of a possibile cryptocurrency ban, crypto news outlet The Block recently reported that Swamy has denied hearing about any discussion of a cryptocurrency ban:
“It will be madness if they do.”
Speaking to Cointelegraph, Ashish Singhal, the CEO of cryptocurrency exchange CoinSwitch — which has its major user base in India — pointed toward the list of bills that is subject to discussion during the Monsoon Session of the Parliament. He said that as much as one can see from the list, no purported ban on crypto trading is scheduled for discussion.
Nischal Shetty, the founder of the Indian cryptocurrency exchange WazirX, and Siddharth Sogani, the founder of the Indian blockchain research company Crebaco, also remarked on the bill, saying there was nothing to worry about. Per the execs, there lies a long road ahead before the bill would even make it to the parliament.
“It’s too early for the draft crypto bill to be presented to the parliament,” Shetty added.
Calling the recent news articles “clickbait,” Sogani said that the Indian crypto community had “reacted with a sudden panic but many crypto users in India are now used to such clickbait news.”
“The bill was moving for sure few months ago but I am not sure about the source which Bloomberg is discussing at the moment,” he stated..
On the same note, Shetty said that it was a known fact that “the bill has been with the Finance Ministry ever since the Garg committee submitted to them.” But the way it has been interpreted in the media has caused mild panic within the industry, adding:
“Now everyone knows that it’s ultimately the same information that has been around for a while.”
Indian Bank To Offer Crypto Services Across Its 34 Branches
For the first time, Indians will be able to take out a loan against cryptocurrencies.
Indian bank United Multistate Credit Co. Operative Society is planning to expand its banking services to cryptocurrencies and cryptocurrency products.
In collaboration with the crypto banking service provider Cashaa, United has established a joint venture dubbed UNICAS that aims to provide both online crypto banking services and walk-in services across its 34 physical branches in northern India.
This move by United and Cashaa comes amid India’s uncertain crypto regulations. While the Supreme Court of India took down the crypto banking ban put in place by the Reserve Bank of India in March, most banks are still skeptical of providing services to crypto companies and individuals dealing in digital currencies.
UNICAS will allow United account holders to integrate cryptocurrency wallets directly with their accounts. Customers will also be able to directly buy Bitcoin (BTC), Ether (ETH), Ripple (XRP) and Cashaa (CAS) by paying either in cash or directly from their account. When UNICAS launches, United will also allow its customers to take out loans against cryptocurrencies.
Cryptocurrencies have seen significant adoption in India since the lockdown started in March. Many Indian cryptocurrency exchanges reported a spike in their crypto trading volume to the tune of 200% to 400%.
Kumar Gaurav, the chief executive of Cashaa, said that the increased interest in cryptocurrencies was a major reason for them to integrate cryptos into the legacy banking system. He said that UNICAS will help disseminate reliable information about cryptocurrencies to the mainstream Indian population and help further the adoption of cryptos in India. He also said that the addition of cryptocurrency services to a traditional bank will help India adopt a more digitized payment system.
India Bans Bitcoin And Wants Retail Investors To Trade Nation’s Sovereign Debt Instead
Retail traders in India will soon be able to trade the nation’s sovereign debt, as policymakers seek to fund another near-record amount of issuances.
Banks will also be allowed to hold more bonds in their held-to-maturity portfolio for longer, and along with the access given to individual investors, should help the government with its borrowing plans, the Reserve Bank of India said Friday at its policy address. The RBI plans to provide retail investors with online access to primary and secondary government bond markets.
The move underlines how the RBI is seeking to shore up a jittery debt market after the government announced plans to borrow 12 trillion rupees ($165 billion) for the new fiscal year. Other emerging-market nations in Asia have also sought to raise funds from citizens, with the Philippines selling debt directly to individuals to battle the pandemic crisis.
“It may just be the beginning of a viable substitute for the small savings schemes at market rates,” said Mahendra Jajoo, CIO, Fixed Income, Mirae Asset Management India, referring to a program where the government offers higher interest rates for deposits. “However, much like sovereign gold bonds, the likely pick-up pace will be at a slow rate.”
Opening G-Sec to retail is well intended, but investors need to know risks before they step in. G-Secs carry duration, and retail enters after rates have fallen, because past returns look high. When rates reverse, this is painful. Target mat structures still better for retail.
— Radhika Gupta (@iRadhikaGupta)
February 5, 2021
A Turn For The Worse? India’s Crypto Plan Unsettling To Local Industry
The Indian crypto industry sees a brief panic over the government’s plans to ban “private cryptocurrencies” and explore the need for a CBDC.
The Indian Crypto community has been involved in discussions with the government about how it should perceive cryptocurrencies and blockchain technology before finding ways to regulate the industry ever since the government placed a now-defunct blanket ban on banks servicing crypto firms in April 2018.
In the latest update, on Jan. 29, the government revealed its plans to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 to the lower house of the parliament (The Lok Sabha) in the upcoming session.
As mentioned in the Lok Sabha’s release, the bill would have a two-fold agenda.
The first is “to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India” and the second one being to “prohibit all private cryptocurrencies in India” while also stating that it would allow for certain exceptions to promote blockchain, which is the underlying technology behind crypto.
The Bill’s Announcement Caused Panic
As the budget was going to be announced just two days later, on Feb. 1, the proposed bill listed on the agenda of the parliament sent waves of panic across the Indian crypto industry, as some assumed that the government would announce its intention to ban “private cryptocurrencies” during the budget.
This panic even led to Bitcoin (BTC) trading at a 20% discount to global prices, whereas it usually trades at a premium of up to 10%. However, the community breathed a sigh of relief when the current Minister of Finance and Corporate Affairs, Nirmala Sitharaman, didn’t mention anything on the subject during the budget announcement. This also caused Bitcoin’s price to recover in India after the budget announcement.
Nischal Shetty, CEO and founder of WazirX cryptocurrency exchange, told Cointelegraph: “The fact that it was not mentioned in the budget shows that the government isn’t in a hurry to make a decision.” Shetty also went on to say how the government might proceed with this bill if it is at all presented in this upcoming parliament session:
“If presented, the bill will most likely be referred to a standing committee so that they hold discussions with the crypto industry of India before moving ahead with regulations for this sector. After all, this is a really important bill that involves both finance and technology. I’m confident that the standing committee will first hold discussions with the crypto stakeholders.”
Although, as reported by the news outlet CNBC-TV18, the government could take the “ordinance route” to pass this bill instead of presenting this in parliament and allowing it to go through the usual stages of a bill passing through the houses of Parliament.
The ordinance route means that this bill could be enforced with the approval of President Ram Nath Kovind even when the parliament is out of session. The report also stated that the ordinance could be enforced within a month of being issued. This has set off yet more buzz in the crypto industry, causing fear of the impending ban if it is enforced.
Lately, Twitter discussions in India have been complemented by the hashtag #IndiaWantsCrypto. This hashtag has gained a significant amount of traction within the Indian crypto community as various investors and other crypto personalities have also begun using the same hashtag.
Following the announcement of the crypto bill in India, WazirX went on to start an industry-wide initiative in the form of an email petition campaign of the same name, Indiawantscrypto.net. This would allow citizens to write to the members of parliament of their own constituencies to urge them to regulate crypto.
Does India Really Need A CBDC?
The bill to be discussed in parliament also announced that the RBI would be working on a framework for how India can create an official digital currency that is backed by the RBI similar to its fiat currency, the Indian rupee.
This is mostly driven by the fact that major economies, such as China’s, have already reached a trial phase for their own digital currency, which has been christened the Digital Currency Electronic Payment and is essentially a digital version of the yuan. Neeraj Khandelwal, co-founder of CoinDCX crypto exchange, told Cointelegraph:
“In years to come, we believe that every country will have its own independent digital currency, and countries that adopt the first will have significant advantages. If there are such major advantages of issuance in CBDC, India should also not fall behind and proactively consider and take a step in a similar direction.”
Although the RBI pointed to a CBDC as legal tender in the country similar to the Indian rupee, it has also called it a liability in digital form for the central bank, which is clearly indicative of the skeptical and apprehensive nature of the lower house of parliament toward digital currencies as a whole.
This is despite the fact that the Indian government and the RBI have been actively studying blockchain technology and exploring the benefits and risks associated with cryptocurrencies and blockchain.
In fact, the Indian government, along with the Election Commission, is working on trials of blockchain-aided voting to enable voters to cast their votes from outside their home provinces. Currently, Indian voters have to travel back to their constituency to physically cast their votes.
There is no option of mailing votes as is the custom in the United States and other countries. Thus, this development is bound to be highly beneficial as a use case of blockchain technology.
However, the need for a CBDC in India currently could be questioned, especially since India already has a highly successful intercountry online payment called Unified Payment Interface, which allows users to instantaneously pay vendors for services and transfer payments to other bank account holders via their smartphones.
This application has been developed by the National Payments Corporation of India and has widespread adoption reaching into rural parts of the country. The success of UPI in addition to the fledgling public banking system and their “ballooning non-performing assets” could just be indicative of the fact that the Indian banking system has bigger fish to fry. On the matter, Shetty stated:
“CBDC will be helpful and solve different problems compared to what existing crypto assets solve. India should definitely have its own CBDC, as it’s a great opportunity for INR to go global. India cannot be sitting on the sidelines while other countries experiment and launch.”
The RBI has also stated in its Payments and Settlements systems booklet that it will first be “exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it.”
Nonetheless, due to the wide nature of the impact of this technological innovation in a country with a population of 1.3 billion people, this will be an interesting space to observe for further development.
What Are Private Cryptocurrencies?
In the brief given in the Lok Sabha’s agenda, the bill states that it “seeks to prohibit all private cryptocurrencies in India.” The usage of the word “private” is highly vague and misinformed, as it doesn’t clearly point to the fate of cryptocurrencies like BTC and Ether (ETH), which are digital currencies that are open-sourced and public in nature, allowing any participants in the blockchain to verify the transactions.
Shetty said that the use of the wording “private cryptocurrency” indicates that “there’s a thought process which says RBI creating its own crypto removes the need for other cryptocurrencies.”
In his opinion, it is a misunderstanding that needs to be clarified. Khandelwal also stated: “Given that the Indian government has not clarified what exactly it means by ‘private cryptocurrencies,’ the only option is to wait and watch.”
Irrespective of what the government means by the term “private cryptocurrencies,” it is undeniable that the level of interest from average Indian investors in diversifying their portfolios by investing and trading in cryptocurrencies is on the rise. This is evident in the rise in volumes witnessed on major crypto exchanges.
Indian Parliament Reportedly Considering Fast-Tracking Crypto Bill
Government officials may be planning to introduce the law potentially banning crypto “within a month” of the ordinance clearing.
The Indian government may be taking a legislative shortcut to pass a bill recently proposed to regulate digital currencies in the country.
According to a report from news outlet CNBC-TV18, the Indian government may take the “ordinance route” to ban the use of private cryptocurrencies in the country as well as create a regulatory framework for a digital rupee issued by the Reserve Bank of India.
Passing the measures within the proposed crypto bill using this method would require the President of India, Ram Nath Kovind, to issue an ordinance when Parliament is not in session.
The news outlet said the appropriate parties had already begun preparing a draft of the ordinance with the goal of introducing the crypto law “within a month” of it being issued. Unlike bills passed through acts of Parliament, ordinances typically allow the Indian government to immediately take legislative action.
“[The government wants] this bill to be cleared as soon as possible,” said CNBC-TV18 reporter Timsy Jaipuria. “We’ll have to wait and see how soon government works, and gets this ordinance cleared.”
The proposed legislation, the Cryptocurrency and Regulation of Official Digital Currency Bill, is currently being considered in the upper house of India’s Parliament as part of its budget session, which will run until April 8 but have a recess between Feb. 16 and March 7. President Kovind is empowered to pass ordinances during parliamentary recesses, meaning India could potentially enact some type of crypto ban as early as March.
Though the bill says it will “prohibit all private cryptocurrencies” in India, it also says it will allow for “certain exceptions to promote the underlying technology of cryptocurrency and its uses.” Cashaa CEO Kumar Gaurav said he believed the legislation was more of an attempt to prevent illicit activities in the industry rather than outright ban crypto.
India’s government has largely not taken a firm position on regulating digital currency since overturning a blanket ban from the Reserve Bank of India in March. Since August, however, reports citing sources within the government have suggested that Parliament is considering a new law banning crypto trading in India. The central bank has also said it would be “exploring the possibility” of a digital rupee.
State of Crypto: India And Nigeria’s Crypto Crackdowns Continue Old Trends
Both nations hope to prevent banks from providing services to crypto companies.
Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De.
Are governments worrying more about the growth of crypto? Two countries already announced crypto-related bans, though this could be an extension of previous efforts at controlling the space – and their own economies – rather than new initiatives.
The Crackdown Begins (Again)
In recent weeks, both India and Nigeria have made noises about banning crypto industry participants’ access to the traditional banking sector. This could be a sign of renewed government crackdowns on the space.
Why It Matters
Bitcoin and subsequent cryptocurrencies were designed to be censorship-resistant, stateless and a tool of economic freedom.
Citizens in Belarus and Nigeria used bitcoin to raise funds for those who lost their jobs or otherwise faced repercussions for protesting against authoritarian regimes. People in other countries use cryptocurrencies as a way of cheaply transferring value across borders.
But the crypto space might not yet be mature enough to actually fulfill those goals – at least, not entirely. Ray Dalio, head of major hedge fund Bridgewater Associates, said government prohibition could have a significant negative impact on cryptocurrency adoption, and we’re indeed seeing governments try to enact or enforce stringent regulation.
Breaking It Down
The Indian government began considering a bill that would ban private cryptocurrencies late last month, defining “private” as any cryptocurrency that’s not state-backed.
The bill, which was introduced to the Lok Sabha, the lower house of the Indian parliament, also suggested that India could launch its own central bank digital currency (CBDC), issued by the Reserve Bank of India (RBI), the nation’s central bank.
There are two details here that stick out to me, The first is that the RBI tried to restrict cryptocurrencies once before, when it told banks they could not provide services to crypto companies in 2018. That ban was later struck down by the nation’s Supreme Court, though RBI vowed to fight the ruling.
This new bill, which was also introduced in the Rajya Sabha (the upper house), could be a natural evolution of that policy goal, one that would have the force of law behind it.
The second detail is the Indian government has also tried to control its financial system before. In 2016, the government demonetized the ₹500 and ₹1,000 notes, some 86% of the circulating currency, nominally in an effort to stamp out “black money,” or cash held from illicit means.
In 2018, India’s Aadhaar system decided every resident effectively needed access to the biometric identification platform in order to buy a cell phone or access banking services.
A continent away, the Central Bank of Nigeria (CBN) published a document saying banks cannot provide crypto exchanges with services. Binance and Bundle Africa immediately announced they would suspend deposits.
Here, too, the CBN says its ban isn’t new, but rather that its statement last week is merely reiterating a position it has held since 2017. Still, the timing of the move is interesting, coming just months after residents began using bitcoin to raise funds as part of the #ENDSARs movement.
Basically, this looks like a trend. Crypto is getting to a place where governments have to pay attention to it. Some industry insiders seem less alarmed about Nigeria’s ban than their Indian counterparts are about the subcontinent’s ban.
Meanwhile, Congress is gearing up to face a number of issues this year, beginning with an impeachment trial that starts this week and coronavirus pandemic relief. However, a number of cryptocurrency issues will likely work their way through Capitol Hill. Here are a few of the major players to watch:
House of Representatives
* Representative Maxine Waters (D-Calif.) – Rep. Waters chairs the House Financial Services Committee, the main committee that oversees cryptocurrency and fintech issues in the House of Representatives. She has called a hearing next week on Robinhood and the GameStop pump.
* Representative Patrick McHenry (R-N.C.) – Rep. McHenry is the ranking member on House Financial Services. McHenry has said publicly that he’s a proponent of cryptocurrencies and fintech innovation.
* Representative Jim Himes (D-Conn.) – Rep. Himes is the chair of the HFSC Subcommittee on National Security, International Development and Monetary Policy, which is holding a hearing on domestic terrorism funding in the wake of the Jan. 6 Capitol Hill insurrection later this month. Expect bitcoin to come up.
* Representative French Hill (R-Ark.) – Rep. Hill is the ranking member on the National Security subcommittee.
* Senator Sherrod Brown (D-Ohio) – Sen. Brown is the new chair of the Senate Committee on Banking, Housing and Urban Development. In public statements he has said his focus will be on evaluating a real-time payments system, as well as paying more attention to housing and urban development issues than the committee has in years past.
* Senator Patrick Toomey (R-Pa.) – Sen. Toomey is the ranking member of the Senate Banking committee.
* Senator Elizabeth Warren (D-Mass.) – Sen. Warren, who drove the creation of the Consumer Financial Protection Bureau, is on the Senate Banking and Finance committees. She hasn’t explicitly said anything about cryptocurrencies recently but has been outspoken on consumer protection issues that could intersect with the crypto industry.
* Senator Cynthia Lummis (R-Wyo.) – Sen. Lummis, who won her seat in last year’s election, is joining the Senate Banking committee as its first member who’s an active bitcoin advocate. She has already announced her intention to launch a fintech caucus in the Senate and said she hopes to “work with federal regulators to ensure that regulation of digital assets are structured to encourage innovation, instead of stifling it.”
Last week, President Joe Biden formally withdrew the nominations of Robert Benedict Bowes and Brian Brooks. Bowes was former President Donald Trump’s nominee to be a Commodity Futures Trading Commission commissioner to succeed current Commissioner Brian Quintenz. Brooks, the former Acting Comptroller of the Currency, was nominated to a full five-year term. Biden is expected to name Chris Brummer and Michael Barr to fill the CFTC and OCC roles.
Changing Of The Guard
Jack Dorsey And Jay-Z To Set Up 500 BTC Blind Bitcoin Trust In India, Africa
Just hours after an anonymous source claimed India would issue a blanket ban on all cryptocurrencies, Jack Dorsey and Jay-Z announced a 500 Bitcoin development trust.
Twitter CEO Jack Dorsey has announced the creation of a blind Bitcoin (BTC) development trust worth 500 BTC ($23.7 million), along with rapper Jay-Z, for teams working on the project in India and Africa.
Dorsey revealed the creation of the trust on Feb. 12 while sending out a call for three board members to oversee the blind trust initially.
JAY-Z/@S_C_ and I are giving 500 BTC to a new endowment named ₿trust to fund #Bitcoin development, initially focused on teams in Africa & India. It‘ll be set up as a blind irrevocable trust, taking zero direction from us. We need 3 board members to start: https://t.co/L4mRBryMJe
— jack (@jack) February 12, 2021
Dubbed the ₿Trust, the application form for board members reveals the mission statement, “Make Bitcoin the internet’s currency.”
The Twitter CEO’s tweet appeared just hours after news broke concerning India’s alleged plans to completely ban the use of cryptocurrencies within its borders. The world’s second-most populated country could soon move to ban all crypto-assets, giving users a 3–6 month grace period to liquidate their holdings, according to an anonymous source who spoke to Bloomberg.
On Feb. 10, Jack Dorsey donated $1 million to the Washington D.C-based nonprofit organization Coin Center which also received a $2 million donation from asset management firm Grayscale. Dorsey’s ongoing infatuation with Bitcoin recently saw him set up a Bitcoin full-node from his Macbook, meaning he now has a hand in verifying the Bitcoin blockchain.
India’s Crypto Ban Is Coming, Hodlers To Be Given Transition Period
An anonymous Indian official has claimed the country’s parliament will soon introduce a blanket bank on crypto assets, and give hodlers three-to-six months to liquidate.
An anonymous source claiming to be a senior Indian Finance Ministry official has claimed that the use of crypto assets will soon be completely banned in the world’s second most populated country.
Speaking to Bloomberg, the source claimed that the use of cryptocurrency in all its forms will be banned under a new law expected to soon be introduced in the parliament. Transacting with crypto via foreign exchanges will also be prohibited.
Crypto investors are expected to be given a three-to-six month transition period to liquidate their holdings after the new law comes into effect, the source said.
The official emphasized that crypto assets have been targeted by India’s lawmakers due to their lack of backing from the Reserve Bank of India, or RBI.
In January, India’s parliament introduced ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ for discussion during the ongoing parliamentary sessions on the country’s budget.
The Bill’s purpose was described as creating a facilitative framework for a central bank digital currency issued by the RBI, and to “prohibit all private cryptocurrencies in India.”
Sathvik Vishwanath, the co-founder and CEO of major Indian cryptocurrency exchange Unocoin, told Bloomberg the local crypto industry are anxiously “waiting for details to come out to determine [their] next course of action:”
“If government goes ahead with banning all cryptocurrencies, except the one backed by the state, it will not make sense to continue our business in India. But we’ll have to wait and watch.”
In March 2020, India’s Supreme Court overturned the RBI’s April 2018 blanket ban on local banks providing services to businesses dealing with crypto, effectively legitimizing cryptocurrency companies across the country.
However, the Indian Ministry of Finance proposed legislation that would again ban crypto assets nation-wide in June 2020.
India Crypto Ban Is Like Banning Internet, Says Former Coinbase CTO
Former Coinbase chief technology officer Balaji Srinivasan has warned that India’s impending ban on Bitcoin and other cryptocurrencies would be like banning the “financial internet.”
Former Coinbase chief technology officer Balaji Srinivasan thinks India’s impending cryptocurrency ban would be akin to banning the internet and could cost the country trillions of dollars in potential profits.
Speaking in an interview with The CapTable, Srinivasan said a blanket ban on Bitcoin (BTC) and other cryptocurrencies would simply redirect trade revenue to nearby Asian markets, amounting to a “trillion-dollar” mistake for India:
“It’s really important that the ban (India’s plan to ban owning, trading, mining or investing in cryptocurrency) should not go through. It would be a trillion-dollar mistake for India, without exaggeration.”
On Thursday, an anonymous senior Finance Ministry official told Bloomberg that the upcoming ban was very likely to occur, revealing that crypto holders will have three to six months to convert their funds back into legal tender.
The Cryptocurrency and Regulation of Official Digital Currency Bill was introduced in late January, and it also lays the groundwork for an official digital currency issued and overseen by the Reserve Bank of India.
Now an angel investor and entrepreneur, Srinivasan suggested that India could end up 20% poorer than it otherwise would be over the next five years, should the ban go through. The former general partner at Andreessen Horowitz said that a cryptocurrency ban would effectively stop the “financial internet” from taking root in India:
“India could get 20% poorer from what it could have achieved over the five-year term. It is almost like banning the internet for 5 years. The losses add up a lot. […] It would be a reversal of economic liberalization in many ways. It would basically be banning the financial internet from entering the country. And it wouldn’t even achieve the desired objective.”
Although the ban targets all cryptocurrency holders, its effect on individuals could be less impactful than its effect on traders and businesses. With the use of cold storage wallets, and by retaining control of their own private keys, Indian citizens on the ground level could still potentially skirt any anti-crypto legislation but would naturally face difficulties when trying to cash out.
India Plans Twin Taxes On Exchanges And Traders Before Passing Crypto Bill
A senior Finance Ministry official told a newspaper that taxation does not necessarily imply legality.
India is reportedly planning a short-term boost to its coffers by ensuring the nation’s cryptocurrency space is taxed before bringing in a ban on such assets.
The government is likely to impose personal income tax (IT) and the goods and services tax (GST) on gains from trading cryptocurrencies and from platform fees, respectively, according to a Wednesday report from Business Standard, one of the largest English-language newspapers in India.
“Bitcoin will be categorized as financial services attracting 18% GST on fee commission collected [by exchanges] under this segment. Plus, [income tax] to be paid on the earnings from this,” a senior finance ministry official familiar with the matter said. They added that an official circular will be released soon.
According to the newspaper’s sources, authorities aim to collect both taxes for the fiscal year April 2020 to March 2021.
The news, if confirmed, is the first clarification on how the cryptocurrency industry and its users will be taxed, albeit probably briefly.
The government is also planning to introduce a cryptocurrency bill in the ongoing session of Parliament, seeking a ban on “private cryptocurrencies,” as well as the formal start of development of a digital rupee to be issued by the central bank.
The bill’s contents are still unknown, and the government is yet to define the term “private cryptocurrencies.” India’s Minister of State for Finance Anurag Thakur has said that the impending bill will fill policy gaps.
While the government has not specifically declared how crypto gains should be taxed, Nischal Shetty, CEO of Binance-owned WazirX said crypto earnings are taxable like any other income and should be declared in the income tax returns. Shetty added that his exchange has been voluntarily paying GST on trading fees collected from customers.
Taxation does not necessarily imply legality, according to another source. “Let it be clear that just because income tax or GST has been charged on the transaction, it does not by itself make the transaction legitimate. Taxability and legality of transactions are independent of each other,” a senior official at the Finance Ministry recently told The Hindu BusinessLine.
In today’s report, the anonymous official said cryptocurrencies, while unregulated, have not yet been banned and taxation rules apply to all kinds of services and commodities.
India To Have A ‘Window’ For Bitcoin, Says Minister Amid Crypto Ban FUD
The Ministry of Finance of India continues to form a careful position on private cryptocurrencies.
The minister of finance of India, Nirmala Sitharaman, has given a ray of hope for the Indian cryptocurrency community as more fear, uncertainty and doubt circulate regarding a supposedly impending ban on digital assets.
In a Saturday interview with India Today, Sitharaman emphasized that the ministry does not plan to shut off Indian innovations associated with Bitcoin (BTC) and its underlying blockchain technology.
“From our side, we are very clear that we are not shutting all options off. We will allow certain windows for people use, so that experiments on the blockchain, Bitcoins or cryptocurrency […] and fintech, which depend on such experiments, will have that window available for them. We are not going to shut it off,” she said.
Sitharaman said that the ministry is finalizing a cabinet note on crypto as India continues formulating its official stance on the asset class. “It is nearing completion, and then it will be taken to the cabinet. The Supreme Court had commented on cryptocurrency. We are very clear that the Reserve Bank of India will take a call on an official cryptocurrency,” she said.
After India’s supreme court lifted a crypto banking ban one year ago, reports of a new ban started circulating in early 2021. In February, another anonymous Indian official claimed that the government was about to introduce a complete ban on crypto, giving investors up to six months to liquidate their holdings.
On Sunday, Reuters published a report citing an anonymous senior government official who claimed that India is preparing to enforce a blanket ban on crypto and impose major penalties on rule-breakers. As part of an alleged bill, India is planning to criminalize “possession, issuance, mining, trading and transferring crypto-assets,” the source claimed.
Despite reports of a ban from anonymous sources continuing to surface, Sitharaman said in early March that the ministry wants to form a “calibrated” stance on digital assets.
Nischal Shetty, founder of local crypto exchange WazirX, seemed optimistic about Sitharaman’s comments in a tweet, stating that it is time for the Indian crypto community to build.
There you go! #Bitcoin crypto will NOT be shut off.
CBDC does not mean shutting off other Crypto assets & utilities.
India, your time is here. Time to BUIDL and win
— Nischal (WazirX) ⚡️ (@NischalShetty) March 14, 2021
The RBI and the Ministry of Finance did not immediately respond to Cointelegraph’s request for comment.
Amid Ban Rumors, Billionaire Nandan Nilekani Says Crypto Can Help Indians
Co-founder of major Indian tech company Infosys Nandan Nilekani has urged the government to help MSMEs access capital using Bitcoin.
Prominent Indian entrepreneur and government advisor Nandan Nilekani has spoken in favor of cryptocurrencies as the government reportedly mulls a ban on private digital assets.
Nilekani joined a Clubhouse session with angel investor Balaji Srinivasan to discuss the state of crypto in India, local business news publication Moneycontrol reported Monday.
Nilekani is a co-founder of major Indian tech company Infosys and the founding architect of the national biometric ID system, Aadhaar. He is also the chairman of a special Indian committee assessing digital payments in India and an advisor to several government agencies and the Reserve Bank of India.
During the session, Nilekani stood up for the freedom to use cryptocurrencies like Bitcoin (BTC) in the country, arguing that Indians should be allowed to have crypto as an asset class. The billionaire entrepreneur reportedly noted crypto’s use as a store of value, outlining its promising potential:
“We should think of crypto as an asset class and allow people to have some crypto. Crypto as a transaction medium will not work as fast as UPI, which is targeting a billion transactions a day. But crypto has enormous capital.”
Nilekani said that Indian regulators need to help the country’s micro, small and medium enterprises access capital through crypto.
Regarding stablecoins and the digital rupee, he said, “I am not sure we need a private stable coin or if a digital rupee will be good enough. We need to look at how it will help Indians, how MSMEs can access capital using bitcoins. No amount of tech is going to sway anyone’s view.”
Nilekani’s remarks come amid increasing uncertainty and doubt in India regarding the legal status of crypto. Anonymous sources reportedly representing Indian government officials have been disseminating reports on an upcoming crypto ban since early 2021.
However, Indian Minister of Finance Nirmala Sitharaman has claimed multiple times that the ministry does not plan to prohibit Indians from using Bitcoin.
India’s Government Orders Companies To Disclose Crypto Holdings
Recent amendments to India’s Companies Act will see firms in the country include their crypto involvement in all public financial reporting.
While the legal status of cryptocurrencies remains undecided in India, companies in the country involved in virtual assets must now report their activities as part of their financial statements.
The new rule follows amendments made by the country’s Ministry of Corporate Affairs to Schedule III of the 2013 Companies Act.
According to the document published on Wednesday, Indian firms both public and private that have invested or traded in crypto during the financial year must disclose their profits or losses.
Other crypto-related disclosures include the amount of cryptocurrency held by the company as of the reporting date as well as additional advance deposits made by customers for the purpose of cryptocurrency investment or trading.
The amendments to the Companies Act of 2013 will come into effect at the start of April.
Companies having to disclose their crypto holdings come on the heels of reports that India’s securities regulators were keen on preventing promoters of initial public offerings from investing in the cryptocurrency market.
Indeed, some IPO promoters are already reportedly issuing affidavits stating that they will liquidate all their virtual currency holdings if the government bans cryptocurrencies.
Meanwhile, despite speculation surrounding an imminent blanket crypto ban in India, the country’s finance minister has said the government favors a more calibrated approach to dealing with cryptocurrencies.
According to a report by The Economic Times, Shaktikanta Das, governor of the Reserve Bank of India has said that both the RBI and the finance ministry share the same views on cryptocurrencies.
Commenting On The Shared Concerns By The RBI And Finance Ministry, Das Said In An Address At The Times Network India Economic Conclave:
“Central bank digital currency is one thing. The cryptocurrencies which are traded in the market are something else. Both RBI and government are committed to financial stability. We have flagged certain concerns around these cryptocurrencies which are being traded in the market. We have flagged certain major concerns to the government.”
Several industry stakeholders continue to caution against the enactment of a blanket ban on cryptocurrencies in India. Meanwhile, India’s parliament was adjourned sine die on Thursday with no crypto bill introduced during the session.
Banning Bitcoin Is Like Rejecting The US Dollar, Entrepreneur Warns India
Rejecting crypto as a reserve currency will lead to an Indian currency devaluation of the worst kind, warns blockchain entrepreneur Raj Chowdry.
An Indian cryptocurrency ban would have grave implications for the future of the country’s economy, and would result in currency devaluation “of the worst form,” says blockchain entrepreneur and HashCash CEO Raj Chowdry.
Chowdry, also the managing director of the United States-based PayBito cryptocurrency exchange, said India’s rejection of Bitcoin (BTC) and other cryptocurrencies would be the equivalent of rejecting the U.S. dollar. Without regulating and eventually adopting cryptocurrency as a reserve currency, Chowdry believes India’s economy would suffer in the long term.
“Maintaining Cryptocurrency reserves are as important as maintaining dollar reserves. By banning crypto, India will end up with the lowest reserve of the most important currency the world has ever seen. This would eventually lead to a currency devaluation of the worst form,” he said.
The fate of cryptocurrencies in India looked ominous after an anonymous official leaked information regarding an upcoming ban to Bloomberg in February. Crypto holders were expected to be given a three to six-month window to transfer their funds back into fiat.
However, recent noises coming out of the Indian Finance Ministry suggested the situation wasn’t quite so clear-cut. Finance Minister Nirmala Sitharaman said reports of a blanket ban on cryptocurrencies had been overstated, and that discussions were ongoing with regulators inside the Reserve Bank of India. Sitharaman added that any upcoming regulations wouldn’t be as severe as previously depicted.
Chowdry welcomes regulations and taxation of cryptocurrencies if it means related business and enterprise can flourish within the country. The alternative is to deprive Indian startups who have already gained a global foothold of the opportunity to grow, Chowdry said.
“What India needs is acceptance of crypto with the imposition of taxation and regulations, that will earn revenue and benefit the huge number of investors and Indian startup companies who have gone global within a short period, rather than depriving the people of their choice of investment by adopting a naive approach towards the crypto,” he said.
Amid the back and forth, the Reserve Bank of India continues to push forward toward the issuance of a central bank digital currency. As with all sovereign states, India’s apparent determination to launch a blockchain-based digital rupee suggests its issues with cryptocurrency aren’t related to the underlying technology, but only who gets to control it.
Chowdry believes a measured approach can be taken to distinguish between blockchain as a technology, and cryptocurrency as an asset class.
“These are two distinct and diverse threads that may be accepted independent of each other. While blockchain is a technology, cryptocurrency is an asset class. It should not be difficult to implement the two in their respective domains,” he said.
Despite what many fear to be a regulatory ticking time bomb in India, global cryptocurrency exchange Coinbase recently announced that it would move some of its IT services to India, as the company edges closer to its upcoming IPO.
Indians Want Bitcoin Despite Government Stance
Bitcoin has a tendency to show up the weakness of governments in the face of technology. This is nowhere more true than in India.
You can’t keep bitcoin down.
That’s true in a lot of places around the world, from Belarus to Nigeria, where crypto is a workaround for dissidents and a substitute for unreliable monetary systems.
But it’s especially true in India, a market that has lots of cryptocurrency activity (and masses of potential) despite a decade of government confusion, inconsistency and delay.
Just recently, India’s Parliament was rumored to be about to pass a bill banning crypto outright, only for that body to postpone the measure and go on a three-month holiday.
In 2018, the Reserve Bank of India sought to ban banks from dealing in crypto. Then last year, the Supreme Court overturned that ban, raising hopes of a boom.
Nobody – even the so-called experts – knows what will happen now. The official government stance has been overwhelmingly negative over the years. But some factions are more supportive than others, and finance minister Nirmala Sitharaman recently left some wiggle room. “We will allow certain windows for people to do experiments on the blockchain, bitcoins or cryptocurrency,” he said.
The consensus speculation is that the government may eventually ban payments in crypto but preserve the ability of people to hold crypto as an investment (as long as they pay taxes). India wants to retain power over its money and plans to issue a digital rupee in due course.
But, in some fundamental sense, the exact government position may not matter. India’s crypto industry is building, whatever the formulation of policy, and that’s because demand among India’s bulging demographics appears enormous.
As CoinDesk’s Anna Baydakova reported yesterday, powerhouses like Coinbase and Binance both have footholds in the market. And tech-savvy Indians with international connections don’t want to miss out on the bitcoin boom.
“India is one of the youngest countries in the world, and these 28- to 29-year-olds are people who want to be a part of the revolution,” Indian crypto advocate and YouTube influencer Kashif Raza told Baydakova. (28 to 29 years old is India’s median age).
Younger Indians see bitcoin as an alternative to gold, which traditionally has held special allure. “Gold would be the investment of choice for the older generation. The young generation sees the advantage … to buy bitcoin, because gold became more stable and bitcoin is so fast-moving,” said Nischal Shetty, CEO of WazirX, an exchange with 1.8 million users.
Bitcoin has a tendency to show up the weakness of governments in the face of technology. It is something they can deflect and make harder to use. But it has cultural strength that’s hard to budge. It is a brand and a movement that’s unstoppable.
And in fact, all the back-and-forth from Indian officials over the ban only seems to be burnishing BTC’s image.
“The rumored ban is stimulating a lot of conversation among the population about cryptocurrency,” Shetty said.
While governments vacillate, younger internet users just want to get on with the future.
Why Cryptocurrency Is Booming In India Despite National Ban Fears
Cryptocurrency is taking off in India despite regulatory fears, which many are now dismissing as nothing but FUD.
India has been the subject of intense speculation regarding the future legal status of Bitcoin (BTC) and other cryptocurrencies in recent months.
Speculation went into overdrive in February when an anonymous Indian minister told Bloomberg that a nationwide blanket ban on cryptocurrency was imminent and that holders would be given a matter of months to dispense with their coins and tokens.
Fears were then allayed — somewhat — when finance minister Nirmala Sitharaman told CNBC that reports of a blanket ban on cryptocurrencies had been overstated, adding that any pending regulation would take a much more “calibrated” approach.
Perhaps it was this promise of calibration that caused a massive spike in sign-ups to one of India’s largest cryptocurrency exchanges, WazirX, during the first week of April. Head of communications at WazirX Priyanka Sharma told Cointelegraph that WazirX had witnessed more sign-ups during the first six days of April 2021 than in the entire first six months of the previous year.
Another Indian crypto exchange, CoinDCX, saw its sign-ups double in the first quarter of 2021 compared to the final months of 2020, the firm’s senior PR manager, Aheli Raychaudhuri, told Cointelegraph.
Pessimism stemming from genuine fears of a country-wide crypto ban appear to have been counterbalanced by optimism sparked by developments in other parts of the world.
The high-profile adoption of Bitcoin and other cryptocurrencies by major firms such as PayPal, Tesla and MicroStrategy have not gone unnoticed in India, according to Sharma, who also pointed out the role that the COVID-19 lockdown has played in the spike in crypto interest:
“The growth spurt is a culmination of the last 12 months of positive movement in Indian crypto, starting with the removal of the banking ban by the Supreme Court of India, to the pandemic lockdown leading to more people learning about crypto. This followed by positive global news about Tesla, MicroStrategy, Square, PayPal, Visa entering crypto.”
Data from publicly available plugins reveal visits to WazirX’s website have increased 630% in the past six months, climbing from around 500,000 to over 4 million monthly visitors. Sharma said the most rapid influx of new sign-ups came from users aged 20–30, adding that people were confident regulators would take a lenient approach when cryptocurrency laws are eventually passed.
The trend was similar over on CoinDCX, which has seen its visitor numbers more than treble since November 2020. According to Raychaudhuri, the majority of new sign-ups also fell under the 18–34 age range.
With no smoking gun having yet been presented by authorities, Sharma believes the fear, uncertainty and doubt, or FUD, created by ministerial leaks in February has been all but eradicated:
“Finally, the crypto bill has yet not been presented. So, any FUD that was created in February and March 2021 has been squashed as a result. It also helps that our finance minister made a statement about India not banning crypto and taking a calibrated approach towards this sector.”
Indian cryptocurrency exchanges aren’t the only ones thinking this way. Leading American crypto exchange Coinbase recently began a recruitment drive in India with a view to basing some of its IT and engineering services in the country.
Raychaudhuri said demand for cryptocurrency has been growing in India all year, especially following the Indian Supreme Court’s decision to overturn the crypto ban that the Reserve Bank of India had placed on banking institutions.
“Currently, there are over 750,000 investors in India and more than 340+ crypto startups that have come into existence since March 2020. Additionally, the trading volumes have grown over 500%, post-March 2020,” said Raychaudhuri.
WazirX CEO Nischal Shetty recently joined other industry leaders in drafting a speculative regulatory framework, which they hope will be taken into consideration by lawmakers.
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