Nasscom, an association of Indian technology companies has recently requested Reserve Bank of India (RBI), i.e., the central bank in the country to relax the India crypto ban. The move came in the wake of RBI proposing a regulatory framework which does not allow cryptocurrencies.
RBI, as well as the Government of India (GoI), has consistently opposed cryptocurrencies while promoting blockchain, the underlying technology. The proposed regulatory framework is formalizing this long-held position.
RBI has earlier cautioned Indian citizens against investing in cryptocurrencies, citing the high degree of speculation in the crypto market. The central bank has also highlighted the risk of money laundering, which the relative anonymity of crypto enables.
Earlier, RBI had asked banks in India to deny banking services to crypto-related businesses such as exchanges. The central bank has categorically ruled out the entry of cryptocurrencies in the payments market.
The views of the GoI aligns well with RBI in with respect to cryptocurrencies. GoI has consistently discouraged the entry of cryptocurrencies, including on the floor of the national parliament.
The risks of money laundering and funding of terrorism with cryptocurrencies weighed heavily behind this convergence of thought between key institutions. The present Governor of RBI was earlier a high-ranked official with GoI and had discouraged cryptocurrencies at that time too.
Opposing crypto, while promoting blockchain
A few crypto exchanges in India had earlier challenged the banking ban by RBI in court, however, the current lobbying by Nasscom focuses on the possibility of India missing out on innovations. Nasscom holds cryptocurrencies as key aspects of blockchain, and they have requested RBI to allow them in the proposed regulatory framework.
However, there are grounds to question the assumption that disallowing cryptocurrencies will impede blockchain innovations. India seems to be picking up the pace as far as blockchain innovations are concerned, as the high number of blockchain patents originating in India seems to indicate.
Apart from businesses innovating around blockchain, central and state governments are also actively exploring the technology. A key policy think tank of the GoI is evaluating blockchain for governance delivery.
The state government in Andhra Pradesh, a southern Indian state is exploring blockchain. We have earlier reported that the state government in Maharashtra, the western Indian state is piloting the technology. The possibility of blockchain innovation slowing down in India is yet to reflect in the ground realities.
India crypto ban: Here to stay?
The latest lobbying effort on the part of Nasscom notwithstanding, both the government and RBI has consistently opposed cryptocurrencies. There has been no noticeable public demand to allow crypto in the Indian payment landscape, and this indicates that the ban on crypto is here to stay. We need to wait and watch how the crypto regulations in India look like, once they are finalized.