India has pushed the pause button on cryptocurrency regulations. The last time the authorities were concerned about this industry was when they banned all regulated entities including banks, from dealing with businesses or individuals in anything related to cryptocurrencies.
The slowly thriving crypto industry that was just about to dig its roots into the Indian community was stopped in its tracks. Many of the popular Indian cryptocurrency exchanges like Zebpay and Koinex closed their doors. The authorities were dead silent about crypto regulations for a considerable amount of time.
Earlier this year in July, Varun Sethi, a tech lawyer in India revealed a virtual copy of an unverified Draft bill dubbed “Banning of Cryptocurrency & Regulation of official digital Currencies.” This sparked fresh controversies regarding the future of cryptocurrencies in India especially because the government was completely silent about the matter.
The document revealed was 18 pages long and discusses the possible effects of this bill if it came into action. The bill defined blockchain as “any information or code or number or token not being part of any Official Digital Currency, generated through cryptographic means or otherwise, providing a digital representation of value.”
The draft clearly mentioned that the use of non-regulated cryptocurrencies as a medium of exchange, store of value, and/or unit of account or as a legal tender is strictly prohibited. The document read:
“No person shall mine, generate, hold, sell, deal in, issue, transfer, and dispose of or use Cryptocurrency in the territory of India.”
After a while, the Indian Ministry of Finance confirmed with an announcement that the bill that supposedly calls for a complete ban on cryptocurrencies and was drafted under the chairmanship of Secretary of Economic Affairs Subhash Chandra Garg, who was also the Finance Secretary of India at that time, has been submitted to the government. The Final report was titled “Report of the committee to propose specific actions to be taken in relation to virtual currencies” and it contained the draft “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019.”
The report discusses distributed ledger technologies (DLTs), virtual currencies, initial coin offerings, a digital rupee (central bank digital currency), the potential uses of DLT for financial services, and recommendations for both DLTs and cryptocurrency. The bill also proposed a complete ban on “private cryptocurrencies” in India. Following this announcement, Garg tweeted:
The government informed the country’s Supreme Court in August that the bill might be introduced in the winter session of the parliament. However, the Lok Sabha, which is the lower house of the Indian parliament, published the agenda for the winter session on Thursday and it does not include the cryptocurrency bill.
The Subhash Garg committee submitted the draft to the Ministry of Finance in February, but the bill was made public in July. Following the publication of the bill, the Supreme Court also postponed all writ petitions to January 2020.
Nischal Shetty, CEO of Indian cryptocurrency exchange WazirX, mentioned that the volume of crypto trading has been rising over the last few years. He explains that an arbitrary decision like this could completely topple the businesses that had been operating legitimately. He said:
“If the bill becomes a reality then India would be the first large democracy to ban an innovative technology such as crypto. Over 5 million Indians own crypto assets worth thousands of crores. They’ll have to simply dispose it off and lose all their wealth.”
Ever since the bill went public, the entire Indian crypto community has come together and has been campaigning constantly for the government to reconsider this ban. Crypto enthusiasts have also pointed out that the bill is flawed. Why the government is holding back is yet to be revealed. It might be the case that the regulators are still trying to figure out where cryptocurrencies fit in Indian economics.