Despite Rumours Of Government Clampdowns, Indian Crypto Activists Rally On
But will this be enough?
The world’s largest democracy has resolved steadfast to keep mum on cryptocurrencies. The Indian government has remained in abeyance regarding national regulatory policy. As a result, it has left millions of investors unclear whether their investments are legal. Couple this with the fact that the Reserve Bank of India has sent conflicting messages, such as prohibiting banks from business dealings with crypto businesses. And the media has been of no help, with sensationalist headlines — often unfounded — doing the rounds regularly.
The Latest On Draft Regulations
A government panel, formed in 2018 under Finance Secretary Mr. Subhash Chandra Garg, was tasked with drawing up a draft regulation policy to govern cryptocurrencies.
The process, however, has dragged its heels. A regulatory framework would supposedly be finalized in July 2018. Save for banks being prohibited from doing business with crypto clients, there remains very little certainty regarding the future of cryptocurrency on the Indian subcontinent. A year later, the process is still ongoing, even after the Supreme Court issued a mandate for a four-week proposal deadline in February 2019. A Supreme Court hearing was set for July 23, 2019.
Secret Leak Of Draft Regulation — But Is It Legitimate?
Meanwhile, a recent report by Indian business and financial news company Bloomberg Quint has caused shock waves across the industry — and the country. According to the draft bill which Bloomberg claims to have accessed, the prospects look sombre. An extract reads:
“Whoever directly or indirectly mines, generates, holds, sells, deals in, transfers, disposes of or issues cryptocurrency or any combination thereof with an intent to use it for any of the purposes mentioned in, or directly or indirectly uses cryptocurrency for any of the activities mentioned in, clauses (e), (g) and /or (h) of sub-section (1) of Section 8 shall be punishable with fines as may be prescribed by the Central Government in the First Schedule or with imprisonment which shall not be less than one year but which may extend up to ten years, or both.”
The report reportedly makes mention of a so-called Digital Rupee. This supposedly substantiates a rumor long since held by industry players that the Indian government would be creating its own national cryptocurrency. Presumably after banning any digital currency opposition.
According to the report, should this bill become legally binding, it will give crypto investors a mere 90 days during which to dispose of their holdings. The draft bill also suggests, Bloomberg Quint reports, that the Prevention of Money Laundering Act 2002 be amended to include under its laurel mining, holding, generating, selling, transfer, and disposal of cryptocurrencies.
RBI Refutes Leak
The RBI has denied any knowledge of such a draft. The country’s central bank stated that it:
- had not received a circulation copy of the said draft
- had, in fact, received no communication concerning the draft bill from relevant government bodies
- carries no information of the draft
- has issued no circular communicating preliminary findings of the draft to the general public
- has not endorsed a blanket ban on sales purchases and issuance in accordance with any other government departments
This was revealed in communication with Varun Sethi, a blockchain lawyer from Delhi, India, who filed an RTI inquiry with the RBI in May to ascertain the central bank’s involvement in shaping up regulations for the forthcoming draft bill.
In communiqué with this reporter, Sethi stresses that the draft bill “is still just a proposal and not even a bill.” He remains positive, adding, “the journey to a bill and then action may take time and may have changes which result in regulation and not just outright banning of cryptos.”
After the Bloomberg Quint piece, Sethi took to YouTube to respond to the rumors, leading viewers through a thought experiment of “What if?”, should the leak be legitimate.
Businesses Already Caving Under Pressure
Sadly, regulatory rumors can be mightier than the pen. Amongst the bruit, Koinex — India’s largest cryptocurrency exchange — has announced that they’re shutting down operations.
Co-founder Rahul Raj divulged why the regulatory uncertainty, the RBI’s account holder ban, and the Bloomberg Quint piece have proven to be headshots to their company:
“Amidst all of this, from a basic economic feasibility point of view, it is just not prudent to continue doing this business. The amount of capital, effort and grit that’s required to conduct a complicated business like this is just increasing with no relief in sight — the infrastructure cost alone for operating the exchange platform and ensuring the safety and security of users’ funds is unbelievably high. Adding to that the costs for legal, customer support and a cluster of other functions, continuing to conduct the business is proving to be an unwise idea with no scope to make revenues to cover for them.”
Undeterred By Uncertainty, Crypto Activists Soldier On
The Indian crypto community is not backing down. India is set to become one of the world’s two largest digital economies. Its current digital economy — which stood at $413 billion in 2016–17 — is expected to grow to $1 trillion dollars by 2025. In all, a sought-after payment economy in the making — and crypto enthusiasts want the decentralized currency to feature in its own right. Similar to what we saw in China after the government’s full-scale crypto ban, cryptocurrency enthusiasts are rallying together to take a stand against a possible top-down proscription.
Akshay Aggarwal, the co-founder of blockchain community Blockchained India, has all hands on deck. Thanks to a partnership between exchange programme Swissnex India and Presence Swiss, the Swiss Department of Foreign Affairs, he recently visited Switzerland. The country’s Zug valley is held as the crypto heartland of the European continent. Aggarwal came away with pivotal insights. He comments:
“Something that I saw regulators in Switzerland doing beautifully is realising that they need to listen to the new generation [of] entrepreneurs and working hard to provide for their needs and requirements. They realised watches and bank secrecy created opportunities for their economy, and now cryptocurrencies seem to be the wave they are not shying away to capitalise on. The regulators are leaving no stone unturned in making it the hub for every such company across the globe by thinking on their feet to make it the best possible jurisdiction for cryptopreneurs. It is high time that regulators in India pay attention to understanding the various aspects of this game-changing development. It requires work, but isn’t that difficult to comprehend. As a country, we just cannot miss banking upon this.”
The Blockchained India team recently rolled out an aggressive educational strategy in the form of a two-month long roadshow series in leading cities across the country. This culminated in the first annual India dApp Fest held in Bengaluru, India in June 2019. The conference brought together local and international crypto enthusiasts, developers, and regulators. As part of the proceedings, they drew up a joint report in conjunction with Ikigai Law. They will present said to decision-making state officials in the coming week.
The question is whether grassroots efforts such as these sway government decision-making.
India Can’t Afford To Miss Out
Is failing to jump on the opportunity a misstep? Aggarwal thinks so.
“I am not sure how the Modi administration is looking at it, but I feel for the new India that our esteemed prime minister wants to create, being open to understanding new developments and enabling indigenous entrepreneurs to succeed in such once a couple of decades opportunities will be key. We can no longer be conservative in our approaches, otherwise we will see ourselves lose the game to Africa, the way we did to US and China. All of the capital inflight will only happen if India doesn’t pass on capitalising such innovations.”
His sentiment reflects a stance shared by many other Indian cryptocurrency enthusiasts and visionaries: Preventing India from partaking in a genuinely global technological revolution — a rare occurrence that the playing field is level from Day One — will be a dire mistake. India has been losing out on key international opportunities for centuries. It would be folly to let this one pass with eyes wide shut.