July 6 5 min read
2018 has not been a good year for any of the cryptocurrencies stakeholders in India. Three months ago, the Reserve Bank of India sort of handed a death note to cryptocurrencies exchanges in India as the regulator said it will not deal with or provide services to any individual or business entities dealing with or settling virtual currencies.
While some of the cryptocurrency exchanges like the BTCXIndia stopped their trading operations, many of them including the Internet and Mobile Association of India moved to the Supreme Court challenging RBI’s diktat. However, the going doesn’t seem to get any better for the players, as during IAMAI’s plea hearing to stay the ban, the apex court backed RBI’s stance and declined to provide any interim relief to exchanges.
Ashish Singhal, Co-Founder & CEO of CoinSwitch.Co feels the SC’s verdict does seem to paint a bleak picture for crypto investments in the country. “This is actually a setback since India’s global counterparts are currently observing the crypto space more closely and implementing better, more conducive regulation,” he shared.
Even though SC’s stance didn’t come as the surprise to anyone, the industry doesn’t seem to leave hope as it bets the stance is temporary. The petition is next to being heard, with all the remaining petitions, on 20th July while the ban is effective from 6th July.
Government’s Silent Stance
During the last Union Budget, India openly distanced itself from Bitcoins or any other cryptocurrency as the Finance Minister Arun Jaitley announced that it cannot be considered as a legal tender. Since the government has been gung-ho about blockchain, the technology which cryptos are based on, however, has remained mum of the virtual currency issue and RBI’s diktat.
With the apex having decided not to stay the ban, Akash Karmakar from Veritas Legal opines that the crypto-trading industry would now have to rally for clarity in government policy relating to cryptocurrencies beyond the mention during the budget speech.
"
By laying a patchwork of laws without an overarching framework or policy, the crypto-industry today is in a uniquely uncomfortable position where it is taxed without being accorded legitimacy as an industry by the parliament. One would hope that the government attempts to take measures to accord legitimacy by legislation that attempts to balance its need for transparency, with the inherent anonymity associated with cryptocurrency trading,” he said to Entrepreneur India.
Having said that, the expert also notes that this would also reduce the loss to the exchequer caused by driving the crypto-industry offshore, it is an imminent need for the Ministry of Electronics and Information Technology to break its silence.
“Perhaps the government may formulate a policy which could set out overarching principles accordingly giving legitimacy to the industry, rather than legislating for problems as they occur, and have the law trail the technology,” he shared.
J
The Logic
Even though the RBI and government stance is directed to protect domestic investors from ponzi schemes, the question is the approach, right?
Keeping investors away from exchanges will in no way help the government to curb conversion of INR to crypto as since the transaction purely can be done on a peer to peer network, exchanges are not needed to initiate or complete a crypto transaction using INR. Local escrow accounts and direct trading in OTC markets can be used to affect trading in cryptos. Praveenkumar Vijayakumar, CEO, Belfrics Group’s thinks this pushes the crypto transactions in India to a further unknown zone where the government has no idea on what's going on with the crypto domain.
“Exchanges were the only source of major information on crypto transactions and rather than distancing them away, effective norms should be developed to allow the exchanges to operate in a controlled manner. With the capital convertibility in place, it might be tough for the government to formulate a safe route to allow the regulated transaction of cryptocurrencies, but the need of the hour is to create one with the help of all stakeholders,” he said while adding that, “If supreme court has to uphold the decision on 20th and if the government and RBI does come up with an action plan to regularize the cryptocurrency market, it is going to be field days for money launders and p2p market players (WhatsApp groups, telegram and Facebook etc) to carry on with unaccountable transactions, as customers will have no choice but to depend on these players.”
What's Next for Investors?
While there are many options for investors to trade in virtual currencies like peer-to-peer, crypto-to-crypto, crypto-to-cash, offshore exchanges and use of international bank accounts, panic has no room to play.
Singhal from CoinSwitch.Co-advises crypto investors to be patient and allow the industry some time to recuperate from a setback. Any anxiety at this point wouldn’t help because crypto has been rising a global level and several countries are not only allowing the same but are also implement better regulations, safeguar