Part of what boosts adoption of cryptocurrencies today is crypto-friendly rules and regulations. For instance, China would’ve had a much larger number of crypto users only if it didn’t ban crypto exchanges. However, a Chinese arbitration court also decided to consider cryptocurrencies as an asset. And who could blame these regulators? There are a lot of concerns that the crypto market needs to address.
As for India, things are looking similar to China’s regulatory approach. India’s crypto regulation is currently hanging in a balance. However, after months of deliberation as to how to approach the crypto market, there is a possibility that cryptocurrencies are going to be banned completely in the country.
According to the Indian Government’s Ministry of Finance, it was reported that the group “deliberated on the issues and challenges” that surround digital currencies. The inter-governmental committee that was tasked to take a closer look at the legal framework of cryptocurrencies in the country suggested that it is best to ban cryptocurrencies in India.
According to the press release: “The Council also deliberated on the issues and challenges of Crypto Assets/Currency and was briefed about the deliberations in the High-level Committee chaired by the Secretary (Economic Affairs) to devise an appropriate legal framework to ban use of private cryptocurrencies in India and encouraging the use of Distributed Ledger Technology, as announced in the Budget 2018-19”.
This means that the ban will not be made on owning cryptocurrencies. However, it is suggested to ban trading and application of cryptos as payment.
April Banking Ban
The Reserve Bank of India (RBI) in April has announced that RBI regulated institutions were no longer going to provide services to businesses that are “dealing with or settling” digital currencies. According to their statement, “Reserve bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs”.
And just like that, the entire landscape of India’s crypto market has changed. This even reached the Supreme Court. And also, it has affected crypto exchanges. Zebpay which was one of India’s biggest cryptocurrency exchanges decided to shut down. Zebpay started in 2015 complete with a know your customer (KYC) model. It has also recorded half a million downloads via Android.
A regulatory ban can be a huge drawback for the industry. Instead of trading on exchanges, those who are holding cryptocurrencies will have no other choice but to stick to peer-to-peer trading platforms such as LocalBitcoins. According to a report made by CoinDance, because of the regulatory uncertainty experienced in the country, transactions denominated in INR in LocalBitcoins account roughly around $1 million in volume weekly.
Nothing is Final Yet
But of course, nothing is final yet. Though the trading volume in India has plummeted by 90%, it is still possible that something can be done about it. There were just delays in the hearings about the case filed against the ban by the RBI.