Cryptocurrency has always remained a sore subject in any country’s regulation. Due to the lack of knowledge, cryptos are not receiving the intended growth scope. Some of the regions have fully regulated cryptocurrency laws, while some are on the verge of regulation. Moreover, there are even some regions where crypto is totally a banned subject. However, India is one such region where cryptocurrency is in talks of regulation. In this article, I further bring to you cryptocurrency regulations in India. Let’s dive in to know more.
As per the Indian Tax Department, the number of unregulated digital exchanges was 11. Indians are spending lots of money on cryptocurrency in expectation of a huge return. The reason is the Bitcoin price increased just from $1000 in January 2017 to $15000 at the end of 2017.
Experts expect at any time the burst can also take place. In such a situation the investors may lose their all money. Therefore RBI and Finance Ministry of India keep on issuing timely warnings for cryptocurrency users.
Where the Central Bank, RBI has issued a payment or money-related warnings on cryptocurrency, so, on the other hand, SEBI and the government of India have applied security and cautions for asset/trading. The tax departments are also scrutinizing the investor’s actions to finalize the taxes applicable on cryptocurrency.
India’s Crypto Journey
The country has a varied history with cryptocurrency. With Bitcoin being available in 2008, Indians, being invested in technology, felt their curiosity to grow. Many started to trade or hold Bitcoin and other cryptos in the coming years. Though the crypto was unknown to the general public, it had created a loyal fan-base for itself within the country.
India’s Reserve Bank of India sent a press release cautioning users about the risks of these virtual currencies. The Press Release highlighted some key points-
- Central bank does not back the Virtual currency.
- RBI does not govern this virtual currency. As a result, India does not authorize trading.
As only a few were dealing cryptos back in 2013, the RBI’s notice served as a reminder to trade crypto cautiously.
This was the year when crypto trading took a great turn in India. Seeing the growing interest of people in Crypto, RBI issued a second warning to caution the users. Finance Minister formed an Inter-Disciplinary Committee to tackle the growing cryptocurrency issue. By the end of 2017, the disciplinary committee had submitted a PIL in the Supreme court. The cryptocurrencies were not considered as a legal tender since then.
2018 budget put a stamp on the earlier statement. The then Finance Minister, Arun Jaitley, mentioned in the Union Budget that from now onwards, cryptocurrencies are not legal tender. Crypto is not a part of the payment systems. Following this, many crypto exchanges faced the brunt &hut down their operations. ZebPay being one of them. WazirX, another popular crypto exchange came up with a P2P solution to avoid the blanket ban.
This year saw some great crypto movements in the country. WazirX CEO Nischal Shetty had earlier started an “IndiaWantsCrypto” twitter movement, which he continuously preaches. It has helped Indians to educate themselves about virtual currencies and blockchain.
However, due to the blanket ban on crypto, the social media giant Facebook had grown cold feet to launch Libra in India. No further talks on it as yet. But, some big players have entered Indian crypto market in 2019. The Malta-based Binance exchange has acquired WazirX exchange. This is a huge leap for India in the crypto industry. Also, Blockchain has found many use cases within the country. Recently, Kerala has decided to implement blockchain and become the Blockchain hub of the country.
CryptovsRBI Case in Supreme Court:
As said earlier, RBI has put a blanket ban on cryptocurrency. They had submitted a PIL in the highest judicial court against crypto. However, RBI faced strong opposition from the Indian crypto community. The people supporting crypto grew in numbers and the hearing is still going on as of Jan 2020. The latest hearing on Jan 14, 2020, was also adjourned and further discussions are encouraged in the next hearing.
Future Cryptocurrency Regulation in India
The government of India is planning to form lesser prohibited cryptocurrency regulations. In 2017, a committee was formed by Special Secretary of Economic Affairs just to suggest some ways to deal with potential AML/CFT and cryptocurrency issues. The government of India is planning to have new legislation to protect cryptocurrency investors. In 2018 RBI has also put a ban on banks for dealing or settling virtual currencies. However, no explicit ban is there in the country. The ministry has also said that there is no specific timeline to make the regulations. Moreover, the government is not monitoring the trades and exchanges conducted by Indian nationals. CBDT, RBI, and SEBI are issuing warnings to the VC traders. In 2017 approx 5 Lakh people have received IT department notices for trading.