Whenever there is a hint of regulatory reform in various parts of the world, the mainstream media starts screaming, “crypto ban!” The assertion that there was a cryptocurrency ban in South Korea turned out to be false, and now it appears that the threat of a ban in India may be a false claim, too.
As it turns out, a finance ministry panel has been set up in India to study virtual currencies. This would be an indicator that the country is exploring their value as a commodity. A likely outcome of their research will not be an all-out ban, but rather a new regulatory framework designed to track the source of these assets. In so doing, the hope would be to engage in anti-money laundering activities to decrease financial crimes. This would include Know Your Customer (KYC) legislation to force financial institutions to keep records on their customers, using real identity requirements.
Subhash Chandra Garg, the joint secretary in the department of economic affairs, and the head of the cryptocurrency panel in India plans to finalize a draft set of regulations by the end of July. The cryptocurrency panel that Garg heads includes several prominent decision-makers from the world of finance in India, such as BP Kanungo, deputy governor of the Reserve Bank of India (RBI), and Ajay Tyagi, chairman of market regulator Securities and Exchange Board of India.
India is open to its citizens trading in the stock market. The difference is that government organizations are theoretically able to track these transactions more easily than crypto transactions, because of existing systems and the maturity of the stock market. With new mechanisms in place, regulators believe that they will be able to track “illegal money” more effectively.
In an interview with ET Now at the end of June, Garg announced the upcoming regulatory guidelines, stemming from a struggle between people in the tax department who would call for an all-out ban, and those government officials who are open to the trading of cryptocurrencies in India. It would stand to reason that maintaining the ability to trade in crypto would be better for the overall economy in India, compared to attempting to force non-participation in this growing market.
India appears to be following the same trend that we’re seeing in countries such as the US with regard to cryptocurrency trading. Regulators are recognizing that cryptocurrencies are an entirely different class of financial asset than anything else traded in history. As such, it evokes fear in some people who would seek to tame it, and excitement in those who wish to see it reach its full potential.
In April, the Reserve Bank of India (RBI) required financial institutions to shut down all bank accounts and loans to cryptocurrency exchanges within three months. As this directive has now reached its deadline, new, decentralized exchanges have begun to replace the centralized companies that were most affected. As for remaining Indian cryptocurrency exchanges that rely on such funding, they appear to be more than cooperative with government probes and regulations. Anirudh Rastogi, managing partner at TRA Law represents four exchanges affected by the RBI directive. He said, “A ban is counter-productive, therefore, we have suggested that there should be appropriate regulations that can address the government or the central bank’s concerns.”