Today, India’s highest court announced they would be extending the previous ban which bars Indian-based cryptocurrency exchanges from transacting with established financial and banking institutions. The announcement is on the heels of last week’s discussion held in a Financial Stability and Development Council (FSDC) meeting.
The previous ruling enacted by the Indian government, earlier in 2018, required that all financial firms end their business relationship with crypto exchanges and/or traders. Subsequently, the crypto market in India has suffered. Crypto trading is down 90% compared from the end of 2017. In addition to trading being down, crypto related businesses are coming up with creative ways to circumvent the ban. For instance, Zebpay moved their entire company operation out of India. Zebpay was known as India’s largest cryptocurrency platform prior to leaving the country.
The ban has also caused legal battles between local cryptocurrency companies and the Reserve Bank of India (RBI), India’s most renown financial institution.
While the recent decision from the Indian government has arguably caused widespread panic, there is an opportunity for a complete turnaround. An official government committee is actively working on drafting the official protocol for cryptocurrency regulation in India. The caveat being, the same governmental body is responsible for the recent ban of crypto in India. Only time will tell if they can generate an impartial proposal or decision.
Indian Government Has Changed Its Stance on Cryptocurrency Regulation
Over the last two years, India’s government has flipped their position on cryptocurrency. In December 2017, the Department of Economic Affairs began to formulate an official document that outlined how cryptocurrency would be regulated throughout India.
The governmental committee, which included three high-level officials, was well received. It was during this time that crypto companies and supports alike felt confident that India would accept the digital currency and all that comes with it.
However, the document was not finished in time to meet the proposed July 2018 deadline. Thus, leaving the country’s crypto supporters beginning to doubt if India would fully embrace crypto. Ultimately, the naysayers were correct. In October 2018, the FSDC laid the groundwork to legally ban cryptocurrency. This was eventually made known to the public via the Press Information Bureau (PIB).
Possession of Cryptocurrency Still Legal; INR Transactions Are Blocked
Given the recent development since December 2017 until today it is not entirely clear how India’s government plans to handle cryptocurrency moving forward. According to Crypto Kanoon, if a financial institution ban continues this will mainly affect cryptocurrency trading platforms that enable the use of the Indian Rupee.
Crypto Kanoon also reports that individuals who own cryptocurrency may be exempt from the consequences of the said ban. Meaning, owning and trading digital currency will be legal for private citizens. However, while a banking ban doesn’t directly affect an individual’s right to own and trade crypto, it does directly affect their ability to cash out their holdings for INR (the same is true for purchases using INR).
Supreme Court Pressure May Have Caused the Ban
Many have speculated that the recent Supreme Court request for an affidavit has greatly influenced the recent decision on the crypto ban in India. Furthermore, the proposal deadlines enacted by the court has also likely contributed to the committee’s decision to ban crypto and merely revisit the idea of forming official regulations at a later date. The combination of ongoing legal battles and time constraints certainly have not helped the Indian government come to a full resolution and we expect to hear more about the future of crypto in India within the near future.