What does “Ban” on Cryptocurrencies in India means (as of Aug — 2019)?

People in India are a lot confused and misinformed around the topic of “Ban on Cryptocurrencies” or “Ban on Bitcoin”. I would like to bust some myths around this topic today.

Government of India (GOI) and Reserve Bank of India (RBI) have been warning people of the country about the risks involved while investing into Cryptocurrencies like Bitcoin and other Altcoins since 2013. It has been saying that because of the volatile and uncontrolled nature of the prices of these Cryptocurrencies and its potential use in black markets.

As a follow up to that, RBI in April of 2018 asked all the banks of India to stop dealing with any entity that deals in Cryptocurrencies in any way. It gave public a time of 3 months to settle all their owned Cryptocurrencies, and banks were open to deal with such entities (during this 3 months period). After July of 2018, if people in India who were still owning these Cryptocurrencies, could not cash it out in form of Indian Rupees through any of the banks in India (because RBI barred banks).

But it is not illegal to hold Cryptocurrencies by a Citizen of India as of Aug 2019.

You cannot cash your Cryptocurrencies doesn’t make it illegal. There is no law currently to penalize or put you in jail for holding Crypto. There are some bills currently being written which might make it illegal to hold Crypto by an Indian citizen, but they are just in draft mode right now and have not passed. Even when they will be presented in parliament, they may or may not pass. So as of now if you hold some Bitcoins, Ethers, Litecoins, XRPs, etc. don’t panic or be afraid. You can use it to buy services or goods if someone (apart from banks) is willing to take your Crypto in exchange of it.

Now on the ban, Internet and Mobile Association of India (IAMAI) has challenged this RBI’s circular in Supreme Court (SC) of India saying that RBI has banned cryptocurrencies on ‘moral grounds’ as there were no studies the banking regulator conducted to analyse if these virtual currencies were actually harmful or not and a total prohibition on cryptocurrencies was uncalled for.

Under the Right to Information (RTI) act of India, IAMAI questioned RBI that what exact study was undertaken for this ban on Crypto? To which RBI has replied and accepted that

“no study had been undertaken by the RBI and neither had any committee been formed to analyse the risks and benefits of cryptocurrency, before banning it”.

To that, the Supreme Court has asked RBI to a chart and cite instances or judgments from other countries which have regulated cryptocurrency, instead of banning it. To give you some insights of how other countries are treating Crypto:

1. US — is trying to regulate Crypto via SEC (Securities and Exchange Commission). SEC is the entity in US which regulates all securities (Stocks in stock market) and the companies publicly listed. In a similar way it is also trying to regulate Crypto with time.

2. Europe — considers Crypto as an Asset. So people who own Crypto will have to pay taxes as per the rules set in Europe on Assets. But it is perfectly legal to own Crypto.

3. Japan and Switzerland — have declared it as a legal tender, which means you can go to a shop in any of these countries and can buy a bicycle in exchange of Crypto that you own (and its completely legal). In other words, it can be used like Fiat currencies (Euros, Yen, etc.)

And different countries are accepting Crypto in their own way. In such a time of technology, a complete ban on Crypto might not go very well for India. And it might also affect adoption of Blockchain technology (which is the underlying tech of all Cryptocurrencies), because people often get confused between Crypto and Blockchain and they consider both the same. Due to such a permanent ban, people might also think that Blockchain is also banned and we should not look into its development (which won’t be very good for India as a digitally developing country).

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