India is about introducing a new law that will ban cryptocurrency trades in the country. This will be going out of place with other Asian countries who have decided to keep the market but provide a regulatory framework instead.
This is not the first time the country is placing a ban on the crypto industry. Two years ago, the Reserve Bank of India issued a ban on crypto transactions, crippling the already growing industry at the time.
According to those familiar with the development, the federal cabinet will discuss the present bill before it reaches the parliament for approval.
Ban affects cryptocurrency but not the use of blockchain technology
Although the Indian government is encouraging the blockchain technology on which cryptocurrency is based, it is not so supportive of cryptocurrency trading in the country. When a message was sent to the country’s finance minister for a response on the situation, the ministry declined any comment.
After dealing with several fraud cases relating to cryptocurrency, the Indian government banned crypto transactions to protect the interest of investors. This decision is coming a few weeks after Narendra Modi, India’s Prime Minister, banned some of the currencies in India without any warning, causing upheaval among traders.
The first ban did not go down well with crypto exchanges as the filed a lawsuit against the finance ministry and won respite in March this year.
After the victory in court, cryptocurrency trading in the country rose by 450%, which revived concerns of the slow pace of the economy, worsened by the COVID19 pandemic.
Within that period, the crypto exchange Paxful reported close to 1000% growth from $2.1 million to $22.1 million between January and May this year. Another crypto exchange based in Mumbai, WazirX, reported a 400% and 270% growth in March and April respectively.
Ban will be a huge blow for crypto exchanges
Apparently, the recent ban will push back the progress the industry has made in recent times.
It will also impact heavily on firms like Singapore-based CoinSwitch, which recently reported about $300 million trading volumes, with 200,000 users currently registered on its platform.
Ashish Singhal, the company’s chief executive officer, said 50% of the users are also registered with CoinSwitch Kuber, another division of the company in India.
Singhal also said there is a lack of clarity on regulation, which is the primary reason why state-owned banks do not want to work with cryptocurrency firms. Since there is no regulatory framework, India’s crypto industry stands the risk of attracting bad players who may take the advantage to dupe investors. With the second ban looming, those affected may be forced to take their case to the Supreme Court to seek recourse again.
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