India Unlikely to Ban Cryptocurrency, Government Officials Say
India’s cryptocurrency saga has taken another turn after government officials indicated that a blanket ban on digital assets is not in the cards. The remarks came mere days after the Supreme Court upheld a banking ban on digital currencies, effectively prohibiting fiat-to-crypto transactions on domestic exchanges.
Blanket Ban on Cryptocurrencies Unlikely
A cryptocurrency panel set up by India’s finance ministry has concluded that digital assets are unlikely to face a comprehensive ban. Instead, crypto assets will most likely be regulated as commodities, according to a senior government officials with ties to the panel.
In an interview with Quartz, the insider said:
“I don’t think anyone is really thinking of banning it [cryptocurrencies] altogether. The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as a commodity may let us better regulate trade and so that is being considered.”
Hacked previously reported that the government committee was against banning cryptocurrencies, though it wasn’t clear what direction new regulations would take. The decision to regulate cryptocurrencies was later confirmed by Department of Economic Affairs secretary Subash Chandra Garg, who indicated that a new draft bill would be presented to government officials sometime this month.
“We are fairly close to developing a template that we think is in the best interests of the country,” Garg told India’s largest financial media outlet in reference to new cryptocurrency regulations.
According to Quartz, the main task of the cryptocurrency committee is to ensure that digital assets do not facilitate money laundering and other forms of illicit financing.
“Trade is not a criminal offence. Most of us trade in various asset classes in the stock market. So how is this [cryptocurrency trading] any different? What has to be in place is a mechanism to be sure that the money used is not illegal money, and to track its source is the most important thing,” the official said.
RBI Ban in Effect
As of last week, Indian lenders have been barred from servicing cryptocurrency exchanges and their users as part of an industry-wide crackdown on digital assets. The measures were first announced in early April by the Reserve Bank of India (RBI), which gave state-regulated financial institutions three months to comply with the edict.
The matter made it all the way to the Supreme Court after several firms challenged the ban on grounds that it was unconstitutional. However, the Supreme Court refused to grant interim relief to those affected by the new policy.
It is not entirely clear why the RBI decided to bar financial institutions from dealing with crypto-related businesses. What’s more, central bankers were unable to justify their ruling according to an information request submitted by a New Delhi lawyer shortly after the ban was announced.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.