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India is hit with its latest wave of speculations, as rumors of a full crypto ban emerge, yet remain unconfirmed by its reserve bank.
Those who mine, trade or own cryptocurrency in India are currently on the edge of their seats, as rumors keep swirling around a draft regulation called the Banning Cryptocurrencies and Regulation of Official Digital Currency Bill 2019. As its ominous title indicates, the bill allegedly calls for harsh penalties of up to 10 years in jail for those who deal in crypto, clearly intending to rid the country of digital tokens. However, whether the bill will become a law or not remains inconclusive, even after attempts of one of Indiaās premier blockchain lawyers to discover the truth.
Aprilās unveiling of a promising regulatory sandbox for blockchain by the Reserve Bank of India (RBI) contained the first hints of a crypto ban, with the rules making no mention of crypto in a thoroughly tight-lipped manner. This prompted lobbyists to call for the bankās reconsideration, and likely fanned the flames of rumors about stricter measures inbound. These embers caught fire around the same time, when local publication The Economic Times suggested that several government departments had already agreed to the ban and were merely waiting for the correct time to announce it.
Following a complete lack of guidance on the claim, Indian blockchain and cryptocurrency lawyer Varun Sethi submitted an official request for information to the RBI. The RBIās regulatory framework for blockchain innovation, as well as its ongoing advice to investors about crypto suggests that it has the authority to make these decisions ā making it a logical target for Sethiās information request. Strangely enough, when the report was released, the RBI stated unequivocally that it hadnāt received communication from the government on the matter.
Reading between the lines
There are some things to consider before assuming that India will ban cryptocurrencies. Notably, Sethi begins each request for information with a statement from āthe articleā (referring to The Economic Timesā piece published on April 26), which cannot be considered a primary source when it comes to financial regulation. Another reason to be skeptical is the language that the RBI uses when answering Sethiās inquiries. The bank wonāt lie on a request for information; it says a lot when, in the clearest terms possible, it states its complete absence of knowledge and that it hadnāt sent a memo or even met internally on the matter.
To believe that India will totally ban cryptocurrency requires one to suspend logic. The country is one of the most technologically progressive, and its recent blockchain regulations are optimistic. It makes sense that India would leave cryptocurrency out of its blockchain laws, because the two ideas (while related) are completely different. Sandeep Nailwal, co-founder and chief operating officer of Matic, an Indian-based solution to Ethereumās decentralized scaling issues, told Cointelegraph:
āThere is no information from trusted sources to support the statements made in this report and itās completely contrary to the widespread support we are seeing for Blockchain technology in India. We fully believe that Indian regulatory bodies wish to foster upcoming technologies, and this includes blockchain and digital ledgers. There is strong backing within the Indian technology communities for these emerging technologies and we expect regulation will follow in due course to cement this.ā
For India, crypto is an opportunity, not a threat
Not only would favorable cryptocurrency regulation help companies like Matic to continue to fund themselves and innovate, it would also provide a good platform for Indiaās digital rupee ambitions. Banning the infrastructure that would allow value to flow into a digital rupee (and give it relative value) would be counterproductive, and for this reason, many experts agree that a crypto ban was never in the cards. The legal tangles it would create (i.e., allowing one or some cryptos but not others) would waste time and brand India a poor target for blockchain investment.
Blockchain law expert and partner at the law firm Nir Porat and Co., Roni Berkowitz, noted:
āCriminal liability for using cryptocurrency on blockchain, while also leaving a loophole for a potential ādigital Rupeeā will cause a regulatory blunder. It will create legislative inaccuracies that are more than blurry legal ideas, India will also be branded as an unattractive market. India should learn from other jurisdictions, like EU member states, how to regulate Blockchain and cryptocurrencies in a manner that is not only effective, but legally sound."
For these reasons, Indians shouldnāt expect that their government will suddenly announce a ban on crypto and make the RBI enforce it. More likely are forthcoming regulations, whereby exchanges will help the government and the RBI to clamp down on tax evasion, wash trading and money laundering more effectively. By putting the burden of Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures on exchanges and kicking out those that donāt follow the rules ā something that already happened in the case of Coinomeās shuttering ā the government can boost blockchainās upsides (investment and innovation) and limit its downsides (fraud and a weaker rupee).
Read more on this:Ā Indiaās Complex Relationship With Crypto
News of a delegationās visit to Zug, Switzerland provides further evidence of Indiaās interest in a healthy embrace of blockchain and all that accompanies it. Zug hosted the group of Indian academics, economists and tech experts who were there to observe how public blockchains have evolved in the āCrypto Valley,ā and how they could be applied in India. Upon the delegationās return to India, around the same time as the RBIās report, United States-India fellow from Georgetown Universityās Masters in Public & Foreign Policy and delegation member Tanvi Ratna reported that āthe Swiss focus on building conducive framework conditions is a big takeaway from this trip.ā
Another delegation member indicated that Switzerlandās āapproach is agnostic to the technology and is focused on creating an enabling framework for public blockchain. After quantifying the risks and benefits of the approach for the Indian ecosystem, we will convey it to policy makers and regulators.ā
Clearly, there are things happening in the background that donāt lend credibility to the marketplaceās current level of fear, but itās best to remain open to any possibility as Indian lawmakers deliberate.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.