The Central Government has been planning to introduce a new law that will ban the trade in cryptocurrencies, placing it out of step with other economies of Asia who have chosen to regulate the fledgling market.
The bill has been expected to be discussed by the federal cabinet before it is sent to the Parliament for approval. Under the law, the federal government will be encouraging the blockchain, the technology underlying cryptocurrencies, but is not keen on cryptocurrency trading.
In 2018, the Indian Central Bank had banned the crypto transactions after a series of frauds. These frauds took place in the months following PM Modi’s decision to ban 80% of the nation’s currency. Cryptocurrency Exchanges had responded with a lawsuit in Supreme Court in September and had won respite in March 2020.
India’s decision to ban cryptocurrency trading:
India’s move will be crucial as more Asian countries weigh the pros and cons of virtual currencies. China, which had banned the initial coin offerings and virtual currencies in 2017, has recently allowed Bitcoin trading as virtual property, not as flat money. Also, both South Korea and Singapore regulate Krypto Trades.
How the ban will affect trading?
The renewed trading ban will affect more than 1.7 million Indians trading in the digital assets along with a rising number of companies setting up platforms for the trade.
The decision will also be affecting companies like CoinSwitch, which is Singapore based. The company has added 2,00,000 users after starting operations in India in June and has been reporting volumes of about $200-300 million, as per CEO Ashish Singhal.
He added that state-owned banks are also reluctant to work with companies because of the lack of regulatory clarity. And as there is no legal recourse, there is a risk of attracting negative players trying to cheat investors.
What other option can the government follow?
Instead of the ban on Cryptocurrency trading, India needs a regulatory framework to protect the uninformed retail consumers to ensure the adequate oversight of the government and the Reserve Bank of India over cryptocurrency businesses.
India will actually be more benefitted from a regulatory framework to attract cryptocurrency investors and businesses.