In a recent meeting of the Financial Stability and Development Council [FSDC] in India, regulatory parties are reported to be considering a ban on the private use of cryptocurrencies in India. This comes at a time when the country is facing the stifling of innovation due to lack of regulatory clarity.
The meeting, which was held with the Union Minister of Finance, Arun Jaitley, was said to have “deliberated upon the issues and challenges of crypto-assets/cryptocurrency”. The council was said to have been briefed upon the issue by a “high-level committee” set-up by the Secretary of Economic Affairs to address it.
It was also revealed that an “appropriate legal framework” was to be set in place to ban the use of private cryptocurrencies in the country while encouraging the use of the distributed ledger technology.
This goes along with the statements given by Jaitley during his speech at the budget meeting of 2018-19, where he stated that cryptocurrencies would not be accepted as legal tender in the country. Moreover, he also stated that “necessary steps” would be taken to combat the use of the asset class in illegitimate activities.
Currently, firms in the cryptocurrency space in the country are facing the music, as seen by the arrest of the co-founder of Unocoin, Harish BV. He was taken into custody by the Central Crime Branch for opening of a cryptocurrency ATM in Bengaluru. He stated:
“The minister’s statement was clear; he stated that cryptocurrencies are not legal tender in India. He did not say ‘illegal tender’. There’s a huge difference. It means you bear the risk of your investment and there’s no regulation for the industry.”
Indian exchanges have also begun to feel the fire of regulatory uncertainty as seen by the shutdown of one of the country’s first Bitcoin [BTC] exchanges, Zebpay. They stopped services late last month, quoting “regulatory and banking problems” due to the Reserve Bank of India forbidding banks to transact with companies dealing in cryptocurrencies. The exchange stated that this ban had “crippled [their] ability to transact business meaningfully”.
The Supreme Court is also yet to pass a verdict in a case that could potentially ease some of the regulatory pressure, adding to the uncertainty in the subcontinent.