On April 5th, The Reserve Bank of India instructed lenders to end their business with crypto exchanges within the next three months. What it seemed during this announcement was that cryptocurrency activity in India is about to end as we know it. However, since the cryptocurrency exchanges were cornered, they had no other choice but to bring the RBI to court. The next supreme court hearing will be held on July 20. This will be two weeks away from the ban.
Transparency and Regulations Instead?
According to the letter sent by Anirudh Rastogi, the managing partner at legal firm TRA Law, the one responsible for filing the Supreme Court petition on behalf of the four crypto exchanges, “a ban is counter-productive, therefore, we have suggested that there should be appropriate regulations that can address the government or the central bank’s concerns”.
What the crypto exchanges are suggesting is the removal of the blanket ban. Instead, they are suggesting that the regulators instead enforce a ban only on those companies that are violating rules and regulations. They mentioned that “We already follow the strict know-your-customer (KYC) and anti-money laundering (AML) guidelines and we have detailed that out in the application (to the RBI)”.
The crypto exchanges are even willing to take their verification steps further by taking the passport details of their customers. There is also a suggestion wherein the crypto exchanges are willing to adopt the international best practices that could potentially offer products such as crypto insurance.
“These are to be taken up by the exchange and adds a layer of surety and customer protection in case of any mishap. All this can happen only if we come under a regulatory purview”.
There are also other cryptocurrency exchanges asking for more time. However, the Narendra Modi government has already come up with a decision to set up a committee under the watchful eye of Subhash Garg, the secretary of economic affairs in finance ministry, in order to draft a law that would tackle cryptocurrencies.
It isn’t surprising that there are countries that are taking a strong stance against crypto exchanges. In September 2017, China went after crypto exchanges. It was because of their fear of the possibility of capital outflow.
In addition to this, clampdown isn’t over. Japan, for instance, after Coincheck getting hacked already imposed stronger rules and regulations that would protect consumers. And because of this, top crypto exchange Kraken was even forced to stop its operations in Japan.
Worst Case Scenario
So what can be the worst case scenario for Indian investors? Though investors are not going to have a chance to buy cryptos using rupees, it is a possibility that the investors can engage in crypto-to-crypto trading activities. And if you are going to be a first-time investor, the only option would have to be a peer-to-peer transaction. The exchange will only have a limited role which connects the buyer and the seller of cryptocurrencies.
India is among top countries where cryptocurrency activity is quite popular. Will this move against crypto exchanges create problems for its investors or will the court decide in favor of a tighter regulation than a blanket ban?