On June 12, 2020, a report revealed that the Indian government is looking to introduce a law to ban cryptocurrencies and the finance ministry has moved a note for consultations with the cabinet and subsequently to the Parliament.
The report added that the government sees a legal framework as being more effective at barring crypto than a circular from the Reserve Bank of India (RBI)
Earlier this year, while allowing traders in cryptocurrency access to banking, the Supreme Court had cancelled a circular issued by the RBI in 2018.
That particular RBI circular had barred all its regulated entities, including banks, from dealing in digital currencies like bitcoin, following up on its earlier multiple warnings on their risks.
Many banking regulators across the world are not comfortable with the idea of cryptocurrencies. The Indian government, especially the RBI, has always expressed reservations to allow cryptocurrencies in the country.
The Indian Cryptocurrency Community Reacts
Nischal Shetty, CEO of local cryptocurrency exchange Wazirx, quickly tweeted in response to the report, pointing out that there is no evidence that the recent note to ban crypto is the same as the report submitted by the Garg committee.
The Garg committee he was referring to had come up with a draft law in July 2019, which proposed a blanket ban on all forms of private cryptocurrencies.
Shetty also added that the newly released plan is in fact “just a note,” and there would be industry consultations before it can move onto parliamentary approval.
The avid crypto evangelist who is behind the #Indiawantscrypto social media campaign, elaborated:
“Banning is not a solution, and I don’t believe India will go for a suboptimal solution here.”
Reacting to the news, Navin Gupta, managing director, South Asia & MENA at Ripple, argued that India is currently at the regulatory crossroads, where the government could adopt regulations that lead to responsible innovation leveraging digital assets blockchain tech.
If the wrong approach is taken, however, Gupta believes that it would lead down a path where India hesitates to adopt game-changing tech and end up operating in uncertain environments where consumers are exposed to risks of financial crimes or compliance issues.
No Need To Panic Just Yet
Today’s news may be a small hint that the Indian government is moving forward with its original plan and that this is not a new blow on the crypto community.
Policy 4.0 CEO Tanvi Ratna explained:
“This was the expected course after the Feb 2019 report was issued, but it was stalled due to the Supreme Court case and other priorities.”
At this point, both the Indian government and the crypto industry must open channels for communication among each other to come up with amicable regulations that do not hinder the growth of the blockchain and cryptocurrencies in the Asian country.