India’s Ban on cryptocurrencies takes another U Turn


With the bittersweet experience the Indian crypto community is experiencing. India’s Ban on cryptocurrencies now feels like a coin toss over and over again. The Indian government rolled out some good news by issuing detailed cryptocurrency guidelines by September.

India’s Ban on Cryptocurrencies now takes another U-turn. This time for the better

A senior official from the Ministry of Finance stated that consultations with all the stakeholders including the Central Bank have already begun. This announcement is independent of the Supreme Court’s hearing of the petitions related to cryptocurrencies in India.

By this statement, the government has officially stated that they are working about the regulatory norms that will guide the cryptocurrency industry in India.

In a first, India’s central bank has called for the regulation of the domestic cryptocurrency sector during Friday’s hearing at the Supreme Court, weeks after enforcing a banking ban against crypto companies.

Earlier in April, the Reserve Bank of India (RBI) issued a circular that forbade all financial institutions – banks included – from offering services to businesses in the cryptocurrency sector. Furthermore, the policy also mandated banks to stop customers from purchasing cryptocurrencies using fiat funds in their banking accounts.

A public interest litigation (PIL) filed in India’s Supreme Court calling for regulation of the cryptocurrency sector saw the central bank absolve itself of any responsibility in framing a policy, claiming it was a policy matter requiring legislation through India’s Parliament rather than a subject of debate among courts.

Indian Crypto Regulation Ready by September: Indian Government Official reports

The Indian government is expected to issue detailed cryptocurrency guidelines by September, a senior official from the country’s Ministry of Finance reportedly said. Consultations with all stakeholders including the central bank have already begun. This announcement is independent of the supreme court’s hearing of petitions relating to crypto regulation in India.

The Indian government has reportedly finished drafting the regulatory framework for cryptocurrencies. The New Indian Express wrote on Saturday that the government is “likely to issue guidelines on cryptocurrency by September.”

India's Ban 

This news follows the statement last month by the country’s Economic Affairs Secretary, Subhash Garg, confirming that the draft law would be ready by mid-July.

Citing that stakeholders include the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Internet and Mobile Association of India (IAMAI), an unnamed senior official from the Ministry of Finance told the news outlet:

 

 

India’s Economic Affairs Secretary Subhash Garg on India’s Ban: Indian Crypto Regulation to be ready by September  Image Source: news.bitcoin.com

 

The draft is ready and consultation is on with all the stakeholders…before coming up with the final paper. We expect it to be ready by September.

 

“The ministry has constituted an interdisciplinary committee under the chairmanship of Special Secretary (Economic Affairs) to examine the regulatory framework regarding virtual currency,” the publication detailed. “SEBI and RBI have expressed some reservations regarding clauses in the initial draft.”

How Should Cryptocurrencies be Regulated in India?

While the government is working on framing a regulatory framework for the cryptocurrency industry in India, it is also important to know how the government is trying to put all of their concerns into the regulatory framework.

An unnamed senior official was quoted by the New Indian Express,

“Cryptocurrency is a new phenomenon and naturally, governments across the globe are struggling with it.” He further detailed, “Most of the officials have serious reservations against it, which all of us agree with … we want to arrive at a common conclusion. There must be an appropriate mechanism to regulate the same.”

While the regulators have not confirmed how cryptocurrency will be regulated, Quartz reported that a senior government official familiar with the matter indicated it could be regulated as a commodity.

“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 looked at,” the publication quoted him saying on July 11.

He explained that cryptocurrency “trade is not a criminal offense,” describing:

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.

Supreme Court Hearing set in September

The Supreme Court of India on July 20 set the final hearing date for all petitions relating to cryptocurrency regulations to September 11. The hearing is in response to the circular issued by RBI on April 6 banning banks and all financial institutions under its control from providing services to crypto companies.

Many industry participants have petitioned against the ban. The IAMAI successfully convinced the Supreme Court to hear its petition on July 3. However, the court did not grant a stay and the ban went into effect on July 5. Banks subsequently closed the accounts of most crypto exchanges.

The government is now considering the matters of regulation seriously. The regulatory body is now considering all the alternatives, in order to come up with the best way to set up guidelines for the country’s cryptocurrency industry.

Image Courtesy for the featured image: shortday.in


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