Cryptocurrency has taken the world by storm. With its increasing penetration in each field of business, stakeholders ask one question: when will cryptocurrency become a legalized mode of the transaction?
The biggest issue with the use of cryptocurrency is regulation. Since crypto regulation is still in its early years, the chance of fraudulent activity rises.
India’s digital revolution:
India is on the cusp of a digital revolution. The digital landscape has changed drastically in the past few years, and India has become a key player in the global digital contribution. Cryptocurrency exchanges have also debuted in India, but a few hiccups might take this technology to rock bottom.
In 2017, the price of Bitcoin rose to $20,000. It was all the rage, and the people of India were hooked. It fueled the investment in India, and the Modi government was very interested in this new trade venture.
On the other hand, the authorities raised their red flags regarding the misuse of this technology by cyber miscreants at home and abroad. In the past, cases like One Coin put some bad light on the country’s name. German regulatory authority had to intervene when the crypto company turned out to be following a Ponzi Scheme. The authorities cautioned investors and tried to knock some sense into people before they trusted the technology with their life savings, but after several mishaps, the Reserve Bank of India ordered to stop these transactions altogether.
Here is a small timeline of the rise and fall of cryptocurrency in India:
November 2017: investors show a huge interest in cryptocurrency in India. They put their money in Bitcoin and other famous currencies.
December 2017: Reserve Bank of India issues a warning while tax authorities launch a probe on the workings of these transactions. The finance ministry tries to match cryptocurrency companies with Ponzi schemes
January 2018: the government announces that cryptocurrency is not legal. The tax department starts sending tax notices to the bank, to regulate the transactions.
February 2018: finance minister comes after cryptocurrency in his speech. He hints that the government will halt these coin exchanges altogether.
March 2018: investor interest drops down due to the hint at the crypto ban.
April 2018: reserve bank of India hints of stopping all crypto exchanges altogether. Banks and other disappointed users take the bank to court by filing several petitions.
May 2018: court asks the bank authorities to present their claims against the ban. Court asks for details from both parties.
June 2018: exchange companies send details to the reserve bank on why the bank will affect India’s economy badly.
July 2018: some petitioners ask for a stay order until the case is solved. Their request is denied.
October 25: the hearing about the case is postponed by the Supreme Court, and RBI is asked to present a counter-affidavit.
November 2018: the government files a counter-affidavit to describe the current situation of the crypto ban and solid reasoning in India
After months of ambiguity and consideration, the Government of India aims to counter the fraudulent forces and pass on regulation regarding cryptocurrency. The Finance Ministry of India created a panel to create norms and terms for the trading cryptocurrency. The draft bill is going to be revealed in December 2018.
This development was made after a counter-affidavit was submitted in the Supreme Court of India by the ruling government. The case focused on the fact that the trading of cryptocurrency in India challenges the bank ban which was enforced earlier this year.
The ban stops all the banks in India from providing services to cryptocurrency exchanges, and it has lead to a choking situation in all industries. As a result, many companies stopped operations in India. One such company called Zebpay found it no longer ‘reasonable’ to work in the country and moved to Malta where the crypto atmosphere was regulated.
This is an excerpt from the counter-affidavit:
[S]erious efforts are going on for preparation of the draft report and the draft bill on virtual currencies, use of distributed ledger technology in (the) financial system and framework for digital currency in India.
The document also highlights that this draft bill will be forwarded to all members of the Indian Finance Ministry. The committee will hold meetings to discuss the draft until it is polished to be finalized.
The Reserve Bank of India asked all the lenders in April to close all relations with cryptocurrency exchanges. Any mode of virtual payment was deemed ineffective. The affectees were seriously concerned by this announcement and went on to ask President Modi for help.
Supreme Court taking notice:
The Supreme Court of India had to hold a hearing regarding this issue on September 11, but it got postponed. On 25th October, the Court ordered the government to file a counter affidavit until the next hearing is held. It happened after several petitions were filed against the ban on cryptocurrency in India. The court asked the Indian government to file a counter-affidavit to outline a strict policy about crypto coins. Formal and informal meetings have been conducted by the government to understand the cryptocurrency ecosystem and make a decision which suits both parties.
Meanwhile, all the banks in India have stopped all kinds of crypto exchanges and have resorted to devise their plans to come up with solutions that fit the customers. Solutions like peer to peer systems are currently being considered by major banks in India.
The government created a task force in March to put regulations around virtual coins. The complete suggestions of this task force were not made public, and the committee was chaired by a top Democrat. Here are the recommendations which were made public by the task force:
- Warnings must be issued about cryptocurrencies and to ask the consumers to stop trading these currencies
- Appropriate action should be taken to stop such trading in the country
- Other committees should be made within the Department of Revenue, Department of the Legislative industry to create a future course of action
The task force ruled out the task to choke the exchanges, not to ban them. Another step was advised to protect the investors by stopping all such actions.
In the counter-affidavit, this report was submitted in a sealed envelope, which showed the government’s discomfort in making such information public. In their defense, the committee said that sealed envelope is their best resort when the information is too sensitive to be made public.
The committee has missed some deadlines but promises to launch the final draft within December 2018. They have also reported that the government is reconsidering many regulations regarding cryptocurrency usage in India. The distribution of ledger technology and making a framework for using digital currency in India is being devised.
While we wait:
The framework of cryptocurrency in India awaits legal guidance. Indian authorities recently arrested the developers of India’s first Bitcoin ATM, by pressing criminal charges. They were booked under the charges of cheating, conspiracy, and forgery. Many government representatives have expressed discomfort over the legal course of action if cryptocurrency is to become a norm.
December 2018 is going to be an important month for those who want this technology to thrive in India.