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.
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