India May See Regulated Cryptocurrencies as Govt. Leans Away from Ban
In a surprising development that would bring relief to Indian cryptocurrency fans, the ET has reported that a cryptocurrency-specific government panel is leaning away from banning cryptocurrencies. In fact, cryptocurrencies may come into play in the Indian market, albeit with regulations and possibly, taxes.
The Reserve Bank of India (RBI) had banned Indian citizens from buying bitcoins in April. The announcement was made in the First Bi-monthly Monetary Policy Statement for 2018-19, in the Statement on Developmental and Regulatory Policies. Also, entities providing such services were asked to ‘exit’ within a specified time. A circular for a time period of three months was issued.
However, the statement did discuss the importance of the need for a “Central Bank Digital Currency”, and a report regarding the same was expected to be submitted by end of June this year.
Consequently, banks stopped bitcoin exchange platforms and traders from using their accounts for trading in virtual currencies. This led to panic selling in bitcoins, and disruption of banking services troubled bitcoin exchanges like Zebpay, Unocoin, CoinSecure, BuyUcoin, and BTCX India. While many are considering shifting base to a cryptocurrency-friendly country, others like Kali Digital and Theblockchainstory have filed writ petitions in High Court and Supreme Court against the RBI guidelines. Some traders are also campaigning against the RBI, urging it to reconsider its decision on banning virtual currency.
The challenge against RBI mainly revolves around lack of proper stakeholder consultation and absence of reasonable grounds to restrict any business. The RBI is being criticized for not researching cryptocurrencies before banning them. Varun Sethi, a local lawyer had filed a Right to Information (RTI) application, to which TNW reports that the central bank has admitted their failure to conduct research or consult finance experts before deciding the ban.
According to RBI’s reply to the RTI, no committee was formed to determine the risk involved in cryptocurrencies, neither was any official appointed to study them. The RBI also did not consult central banks from other countries.
The TNW says, “So, what has RBI done to actually examine cryptocurrencies? In the longest answer to the RTI, RBI has described the list of ‘committees’ the body has been a member of, and the number of circulars it has issued against the risk of virtual currencies. But no mention of any research or consultations that the banks undertook.”
“This RBI response has cemented our case ahead of the hearing in SC. The grounds on which our writ petition has been filed is that the RBI has not done enough research to ban a business completely,” The ET quoted Rashmi Deshpande, a lawyer fighting the case in India’s Supreme Court.
Pursued by regulatory and security concerns, bitcoin and other major cryptocurrencies have taken a hit after news of Korean cryptocurrency-exchange platform Coinrail being hacked, spread in the market. After going up to more than 1,300% last year, 2018 has seen bitcoin go down by 53%, and currently, it has been on a two-month low.
The process of outright banning cryptocurrencies and then softening their stance towards them has been seen in the behavior of other governments too. Governments, such as South Korea, Japan, and US, were all tough on cryptocurrency businesses, but later brought in regulations to deal with it. The Indian government too seems to have adopted the same pattern. A cryptocurrency tax is also in the offing, according to reports.