Will India Change Back the Crypto Trade Ban?
This July on the 20th, the Supreme Court in India is holding a court hearing on the legality of trading cryptocurrency in the country. It’s an important date for the local cryptocurrency sphere which has been suppressed to a heavy degree during the last month by the country’s Reserve Bank of India, who banned all dealing cryptocurrency or related businesses.
The reason, people are hoping for an overview of what’s happening with a harder approach to live on, but, late of last week a report was issued focused on anonymous sources in the government who have suggest that cryptocurrencies are likely to be seen as commodities in the near future, thereby becoming regulated by the correct authorities in the country instead of simply banning them.
The Recent History Of Cryptocurrency In India
The country has been anything but accepting towards its stance on cryptocurrency. The relationship between the two dates way back in December of 2013, when the RBI first issued an announcement to the public on cryptocurrency, warned them of the risks it carried – security issues, volatility, and illegal activities. Since that date, the baking agency has been putting like announcements out, responding to the growing popularity of cryptocurrency, with the last being issued in December of 2017.
The warning hasn’t addressed the legal status of BTC as well as other altcoins in India. Dr. S.P. Sharma, Chief Economist, gave an interview to the publication the Economic Times in India in October of 2017. He stated that the government has still not bought Bitcoin formally, under the definition of currency, or has it made it illegal. Some experts have stated, the state has decided to take a passive role because of the lack of planning at present time. And therefore, Anirudh Rastogi, manager at the law firm TRA, stated the problem was not having a clear strategy, is the main reason they have been reiterating similar statements about investors not going to big.
Even so, cryptocurrencies received more exposure than ever because of the momentum gained since 2017 – when BTC was trading at nearly $20,000 per token – the government of India stepped into place with a fast approach, as the Income Tax Department of India started their process. Another statement by the Business Standard, on December 13th, visited nine different virtual currency exchanges in Bengaluru, Hyderabad, Mumbai, Delhi, as well as other places regarding tax evasion. More so, the financial team at the agency sent notices of taxes to more than 400,000 investors based on the history of their personal transactions.
The situation was less optimistic for cryptocurrencies following India’s Ministry of Finance comparison of Ponzi Schemes and Bitcoin to local banks – like the State Bank of India or SBI, Axis Bank, HDFC Bank, ICICI Bank and Yes Bank – who started taking a stance on fighting cryptocurrency exchanges by closing accounts entirely or controlling operations.
During April of 2017, RBI announced that the bank is no longer giving services to any patron who works with cryptocurrencies in any way. The decision basically changed to law on July 5th, when the deadline passed. What this means is that citizens can no longer trade cryptocurrencies on exchanges. Instead they must use P2P networks to do so, mainly where C2C operations are allowed. If any citizen wants to exchange their currency for fiat, they will need to look to the marketplaces online, or black markets. Also, Cryptocurrency exchanges and businesses can’t receive loans from banks that run inside India, following the guidelines of the current legislation.
New Way Of Life Outlaws Cryptocurrency
It’s a fair argument that the government in India has a hard regulation set in place so far that has basically pushed the cryptocurrency community underground. Therefore, it’s become far less regulated than before. As of now, there is a massive number of local exchanges who have either closed their shop up somewhat or completely stopped operations all the way. The first to suffer was BTCXIndia and ETHEXIndia. BTXCIndia pointed out the government’s pressure on cryptocurrency as the main reason for closing their doors. Both entities are now active again.
The biggest remaining players, like that of Zebpay and Unocoin – Coinsecure, is offline as of now because of recent hacks performed on it – now gives out warnings to clients that withdrawing the rupee processes is now compromised because of the RBI ban deadline. In the announcement made on the matter, Unocoin mentions they are in the process of making new operations for INR withdrawals and deposits. They’ve also introduced Unodax – a P2P solution designed to bypass the RBI ban. Other exchanges have released like services, including WazirX and Koinex.
Elsewhere, the Times of India makes reports on several numbers of opportunities who use the RBI ban for their advantage by cashing in on sales caused by panic in India through arbitrage – a new strategy that implies purchasing BTC inside India for low costs, then moving it to a middleman located in another country, who then wants to sell it there for a better rate as well as share the profit among any involved parties.
More confusion has been instilled by a Bloomberg Articles that quotes parties operating with anonymity and direct knowledge of the government who plans on imposing an 18 percent rate placed on goods and services known as a (GST), mainly for cryptocurrency. It hardly works with the RBI ban – which makes it next to impossible for crypto coins to be taxed, when one isn’t even supposed to trade them in the first place. Even so, news like this shows a more positive outlook on regulated cryptocurrency is likely coming soon, or that there are several different viewpoints on cryptocurrencies within the India government, meaning they’re not seeing eye to eye.
The New Desire: Making it a Commodity
On the 11th of July, Qartz India released an article named India may not ban cryptocurrency after all – the new piece of content stated anonymous sources claimed the finance ministry panel is ready to research cryptocurrencies to study digital money, suggests they may be treated as commodities. Another senior official made the statement that:
“I don’t think anyone is really thinking of banning [cryptocurrencies] altogether. The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as [a] commodity may let us better regulate trade and so that is being looked at.”
Seeing Cryptocurrencies as commodities shows the United States Commodity Futures Trading Commission or CFTC’s approach. The United States agency has total control of commodity derivatives transactions in the country that claims coins are essentially commodities: basically, the viewpoint of the agency is that BTC is closer to gold than to other more controversial currencies or securities, since it’s not backed by the government, with no liability attached to it at all.
Shubham Yadav, co-founder of Coindelta – an Indian Cryptocurrency exchange specialist agrees with that point of view:
“Though cryptocurrencies belong to a new class of financial assets, we can still welcome them as commodities and not currencies because of their high volatile prices.”
The panel focused on cryptocurrency was also hit back in December of 2017 with aim of gaining understanding on the expanding cryptocurrency market. This includes Subhash Chandra Garg, secretary of the department of economic affairs and several others like the chairman of the exchange board of India. It’s the second panel for cryptocurrency to sprout up in India – who has been established by the government – they recommend to slowly shut the industry out. The argument is that one day, the people involved could potentially lose a lot of money.
Then in June, the head of the more recent and crypto friendly panel, stated to news outlets that the task force was nearly ready to introduce new drafts for regulating cryptocurrency infrastructures that promise to deliver within just two weeks of July – there have been no like announcements made by press time, however.
“We are fairly close to developing a template [for the cryptocurrency industry] that might be in the best interests of our country. We have moved pretty far in this regard, and we have prepared a draft that entails what parts of this businesses should be banned and what should be preserved.”
Other local firms working with cryptocurrency are ready to negotiate with the country’s government, and, as Quartz stated, “have already agreed to be open for more scrutiny.” Additionally, they assure that solid Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures are already implemented, while they are willing to introduce other suggestions. Shubham Yadav, co-founder of Coindelta, told the publication:
“We are also ready to work with the government and assist them on creating a regulatory framework. We can help them in designing a monitoring system for blockchain where it can remotely monitor all transactions.”
The central bank of the country has put the ban, creating controversy across the board, with many of the courts appealing to the courts because the ban is said to be unconstitutional.
Therefore, the new community waits for the date of July 20th, when the hearing with the Supreme Court in the country happens, releasing the position with total clarity about the RBI blockcade. But, it’s worth noting that on July 3rd, the court will rule not to give relief to anyone who suffered from the ban at a hearing of the internet and Mobile Association of India (IAMAI) – an organization comprised of people from different exchanges who are fighting the ban.
Another previous hearing in May, IAMAI has made the request to submit for a representation to fight the Central Bank of India.
Blockchain Always Welcome
Like China, the ban in India doesn’t affect the blockchain – in fact, stating that the blockchain is seen as extremely positive. The bank even announced they will release their own currency that runs on the blockchain. The RBI Deputy Governor stated:
“Technological innovations, including virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system.”
Even so, India is now the home of some of the most progressive blockchain initiatives. Back in May seven of the largest banks in India joined the blockchain powered trade finance iniative. The new alliance, called the India Trade Connect, has participants like Axis Bank. It has created tests for conduct to address the “trade finance process requirements of banks.”
Lastly, back in June, the new government of South India in the State of Kerala, made the announcement that it is going to use blockchain to supply food and distribute it with a new project headed by Keralan think tank. It will rely on the blockchain and Internet of Things to create the new framework for the state regarding different food stuffs, thereby making blockchain essential for the Indian government.