The Indian crypto community is undeterred by the widespread rumor that its government is discussing a bill which could ban some cryptocurrencies. Local crypto exchanges have revealed to news.Bitcoin.com that their trading volumes have been increasing despite this report. Meanwhile, experts have weighed in on this possible bill, and another crypto exchange may be shutting down due to the banking restriction by the central bank.
The media recently reported that the Indian government has kicked off an interministerial discussion on a bill entitled “Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019.” The news spread like wildfire as many media outlets covered the story; some are calling it FUD while others are treating it as a fact.
Indian crypto traders seem undeterred by this news. The CEO of local crypto exchange Wazirx, Nischal Shetty, shared with news.Bitcoin.com:
The report did not really affect volumes at all … Unless we hear something concrete from our finance department I don’t think it’s going to affect existing traders.
The CEO added that his exchange “saw the highest trading volume in April where we crossed over $11M in trading.” Noting that “We have seen such similar news come out in October 2018,” he emphasized that “Basically no more FUD is being created by such media news. Everyone is waiting for concrete info to come from the government.”
Another local crypto exchange shares a similar sentiment. Instashift’s Jacob Mani told news.Bitcoin.com that “The reports about the ban haven’t deterred anyone.” He elaborated, “Since Koinex had been on maintenance for a few days we have been seeing more volumes,” confirming:
The activities keep on increasing day by day.
Dismissing the Ban Rumor
Varun Sethi, founder of Blockchain Lawyer, shared some thoughts on the “Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill” with news.Bitcoin.com. He commented:
My preliminary thoughts are that the bill is too far from reaching discussion at the upper or lower house of Parliament in India. The media seems to be cooking up news.
This is not the first time reports of a ban have been blown out of proportion, but the government has yet to offer any sort of confirmation. In December last year, anonymous sources told CNBC TV18 that “The panel has suggested that a new legal framework within the Reserve Bank of India (RBI) guidelines should be brought in to ban cryptocurrencies and the law should clearly specify that any kind of dealing in such currencies should be treated as illegal.”
A few weeks later, a different media outlet quoted an unnamed government official as saying: “There is a general consensus that cryptocurrency cannot be dismissed as completely illegal. It needs to be legalized with strong riders. Deliberations are on. We will have more clarity soon.”
Ajeet Khurana, CEO of crypto exchange Zebpay, shared his thoughts on the matter with Micky news outlet Wednesday. “I have talked to all of the top stakeholders in the Ministry of Finance, the central bank, the securities regulator and despite them having a certain amount misgiving around crypto I have never heard them talk of banning it,” he described, elaborating:
So it’s very interesting that the people who could ban it have never said they will ban it.
Crypto Asset Regulators in India
An interministerial committee headed by Subhash Chandra Garg, Secretary of the Department of Economic Affairs, is responsible for drafting the country’s crypto regulation. The committee includes representatives from the Ministry of Finance, the Ministry of Electronics and Information Technology, the RBI, the Securities and Exchange Board of India, and the Central Board of Direct Taxes.
However, the Financial Stability Board (FSB) published a directory of crypto asset regulators for all of its member countries last month, listing the RBI as the only regulator for crypto assets in India. The FSB is an international body that monitors and makes recommendations about the global financial system. Currently, the “RBI does not have a legal mandate to directly regulate crypto-assets,” the board explained. “RBI’s current mandate permits it to assess financial institutions’ exposure to crypto-assets and supervise their operations.”
Within its mandate, the RBI issued the infamous circular in April last year prohibiting regulated financial institutions from providing services to crypto businesses. The restriction went into effect in July.
However, the central bank never did any research before issuing this circular as evident in its reply to a Right to Information (RTI) request filed by Sethi soon after the circular was issued. The lawyer asked the central bank what research it had done before issuing this restriction. “The RBI specifically mentions that it conducted no research or consultation before the implementation of [the] restriction in April. The RBI also responded that no committee was ever formed for analyzing the concept of blockchain before the decision,” the Economic Times quoted Sethi as saying.
Victims of RBI’s Action
The banking restriction has crippled many crypto businesses, particularly exchanges which had to stop allowing their users to deposit and withdraw INR from bank accounts. Coinome, an Indian crypto exchange backed by online payment gateway Billdesk, may have become the latest exchange to fall victim to the lack of regulation. “All crypto markets on Coinome will be suspended, effective 2pm on May 15th, 2019. Customers are requested to withdraw all their crypto assets from Coinome at the earliest,” the exchange announced Thursday.
Coinome also sent an email to its customers explaining the situation, which Quartz claims to have seen. According to the news outlet, the email notes that “the supreme court is yet to act upon the public interest litigation (PIL) on (the) regulation of cryptoassets,” adding:
India is currently going through uncertainty on crypto guidelines and regulations. The government of India has not yet taken a decision on the regulatory framework for crypto exchanges or wallets.
Zebpay, formerly one of the largest crypto exchanges in India, was the first major exchange to shut down its trading operations in the country due to the banking restriction. After exiting India in September last year, the exchange expanded abroad, with the most recent launch being in Australia. A smaller crypto exchange, Coindelta, announced its shutdown in March after the supreme court decided to postpone hearing the crypto case to July.
Moreover, the Economic Times reported last month that another major crypto exchange in India, Unocoin, had laid off most of its staff. The exchange scaled down its team from over 100 people in February to just 14 employees. “We did ask people to leave last week, but our operations will continue for the foreseeable future. We have some amount of reserves to push through for the next couple of months and will wait for the supreme court’s verdict,” CEO Sathvik Vishwanath told the publication. Unocoin also tried launching a cash kiosk in October last year in an effort to allow its users access to INR after the banking restriction took effect. However, it ran into trouble with law enforcement which led to the arrest of two of its founders including Vishwanath.
Indian Crypto Regulation on the Horizon
India’s legal framework for cryptocurrencies was supposed to be ready in July last year but has continually been postponed. The Garg committee has received many suggestions for the regulation. “Various options for treating virtual currencies and crypto assets including banning/regulating are being examined by the committee,” the Ministry of Finance wrote in its summary report of the Indian government’s 2018 activities published in March. No further official announcement has been made regarding crypto regulation.
Further, the Indian government will also be participating in the G20 summit in June where crypto regulations and global standards for crypto assets will be discussed among the G20 countries and global standard-setting organizations such as the Financial Action Task Force (FATF). India’s Department of Revenue has been working with the FATF to establish global crypto standards, the Ministry of Finance has previously revealed.
For now, Indian crypto businesses and enthusiasts are waiting for the supreme court, which will resume hearing the crypto case on July 23. The court is expected to hear about the regulatory framework for cryptocurrencies from the government as well as address the banking restriction by the central bank. In the meantime, several existing laws in India could already apply to crypto assets.
What do you think of this ban rumor and how Indian traders dismissed it? Let us know in the comments section below.
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