Further developments in regards to the legality of cryptocurrencies in India suggest that the local government is contemplating an all-out ban. The news came after the topic was discussed in a Financial Stability and Development Council (FSDC) meeting held earlier this week.
Earlier in 2018, the Indian government demanded that all banks were to immediately cease any business ties with crypto exchanges and/or traders. The move has left the current Indian crypto marketplace in tatters, with trading volumes 90% down compared to the final two months of 2017. As a result, India’s largest cryptocurrency platform, Zebpay, took drastic action by moving its primary means of operations overseas.
This debacle has led other local crypto-centric startups to enter into heated legal battles with the Reserve Bank of India (RBI), the nation’s foremost financial body.
In spite of the flailing Indian crypto economy, there did appear to be light at the end of the tunnel in the form of a government panel tasked with submitting a framework so crypto could be legally regulated. However, it seems that the very same task force is behind a push to ban the use of digital currency in India.
Indian Government Has Taken A U-Turn on Cryptocurrency Regulation
In December 2017, the secretary of the Department of Economic Affairs, Subhash Chandra Garg, was put in charge of a high-level committee formed to oversee a draft proposal that would contain suggestions on how crypto assets can be regulated in India.
The chairman of Market Regulator Securities, Ajay Tyagi, and the RBI’s deputy governor, BP Kanungo were also assigned to the task force.
At this point, supporters of the industry were led to believe that India may have turned a corner. With three well-known government figures tasked with creating a legal framework for the future existence of digital currencies in India, news of the panel’s creation was welcomed.
Draft regulations never made it to the table after missing the proposed July deadline, and the continued delay had left many believing the government would indeed move forward with a ban.
Those that did remain skeptical were proven right when the latest FSDC meeting held on October 30th penciled a section in that would cover the possibility of an “appropriate legal framework to ban the use of private crypto,” which was clearly evident in a press release issued by the Press Information Bureau (PIB).
It seems the task force has been assigned to devise a plan on how to regulate the crypto market has gone full circle, leading the group to suggest to ban the innovation.
Possession of Cryptocurrency Unlikely to Be Affected
It is not clear what the government’s intentions are at this time. Though, if a ban is issued, it is likely to only affect the relationship between the Indian Rupee and cryptocurrency trading pairs. This is according to Crypto Kanoon, which is a platform for blockchain regulatory news and analysis.
From what we can tell at this time, Crypto Kanoon has stated that possession of a digital currency portfolio for citizens may not fall under the scope of any proposed ban. That would mean those that want to trade in crypto can do so.
That said, it would also mean that the estimated five to six million crypto assets users in the country may become unable to cash out their holdings for INR and vice versa which would force people to go underground and hide their crypto dealings which is very easy if you consider VPNs are widespread which is evident just by reading VPN articles that tell us how good they are at hiding people’s identities.
Supreme Court Request May Have Influenced Ban
It is quite likely that the ongoing legal battles with some of India’s cryptocurrency exchanges have influenced the U-turn decision to propose a ban.
Recently, the Supreme Court requested that the government submit an affidavit that should state its official stance on the matter. It is possible that Garg and his team have succumbed to the mounting pressure to bring forth new regulations. With the court adding time constraints to the task force’s regulatory proposal, it is highly likely the team decided to ban digital currencies altogether, with the possibility of revisiting proposed regulations at a later date.