India will not ban cryptocurrencies or crypto exchanges and trading!
In the past few days, India has been the main focus as reports of an imminent ‘ban’ on bitcoin and other cryptocurrencies looming in the country. However, India is not introducing a ban or planning to ban crypto exchanges and trading. The reports emerged after the finance minister Arun Jaitley delivered the 2018-2019 country’s budget. The Bitcoin is the most popular crypto in the country, but Ethereum and Ripple still have significant daily trade volumes.
The Tax Authority and volume of India crypto transactions
The ban reports did not start immediately after the finance budget report. However, as early as Jan 22nd when the country’s tax authority sent tax invoices to many cryptocurrency traders following a national wide survey on the state of cryptocurrency trading. According to a Reuters report, the tax officials stated that the country contributes to over $3.5 billion crypto related transactions and investments in less than two years. Other reports such that India accounts for 1 in every 10 global bitcoin transactions.
As crypto-currency trading can involve faceless and nameless transactions, the tax authorities visited a number of exchanges requesting for investors and traders identity. During the visit, they claimed that the identities are for AML compliance purposes but later the intentions the IT (income tax) department revealed their intention.
The Central Bank and Court Rulings
India’s Central Bank, the Reserve Bank of India on Jan 9th issued an investor warning on the risk associated with the crypto market. The bank warned that the cryptocurrencies are not controlled by any central bank or financial body and is not recognized as a legal tender. As reported by CCN, the central bank stated:
“In the wake of significant spurt in the valuation of many (Virtual Currencies) VCs and rapid grown in Initial Coin Offerings (ICOs), RBI reiterates the concerns conveyed in the earlier press releases.”
Two court rulings failed to provide clarity on the nature of cryptocurrencies now awaiting a Supreme Court ruling forced the government to pursue a regulatory framework. Court proceedings are at times lengthy, ambiguous and costly as opposed to a regulatory framework. An inter-ministerial –committee was developed to investigate and research the cryptocurrency and its market impact. A Supreme Court cybercrime lawyer Pavan Duggal proposed that the government should adopt a measure that reduces the cryptocurrency use in illegal activities through a “limited legality” in the short- term before a wider regulation is in place.
The Finance Minister Budget report
During the budget reading on Friday, India Finance Minister stated that the government does not recognize crypto-currencies as legal tenders. According to a transcript published by LiveMint, Jaitley, the government is interested in the underlying Blockchain technology, but opposed to digital currencies.
The transcript reads:
The Government does not consider crypto-currencies as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system. The Government will explore use of blockchain technology proactively for ushering in the digital economy.
The finance minister clearly indicates a move to bring sanity to a fast-moving, faceless and nameless market, not introducing a ban as reported by the media.