Debunking the Indian Crypto myth
The global outlook on blockchain and cryptocurrencies in India is negative to say the least. A simple google search result ‘Is cryptocurrency….’ shows the relative fear and uncertainty of the regulations surrounding cryptocurrencies and blockchain in India.
The fear or FUD (Fear, Uncertainty, Doubt) about the status of blockchain in India is primarily fuelled by selective media reporting and ignorance of the general populace. This article aims to debunk the myth that blockchain / cryptocurrencies are banned.
Brief Evolution of Blockchain in India
The advent of blockchain in India began in 2014 with the emergence of Indian cryptocurrency exchanges which primarily facilitated the trading of Bitcoin to meet the demands of the increasing trader population. 2015 welcomed the foray of other firms which leveraged the blockchain technology to provide solutions.
It was not until 2016 that non-blockchain companies entered the blockchain universe. This was primarily because of partnerships with global blockchain players.
The biggest example of this was ICICI Bank, one of India’s biggest banks which boasts over $11 billion in revenue. This is an extract from their press release where ICICI bank executed India’s first banking transaction on blockchain,
“ICICI Bank is the first bank in the country and among the first few globally to exchange and authenticate remittance transaction messages as well as original international trade documents related to purchase order, invoice, shipping & insurance, among others, electronically on blockchain in real time. The usage of blockchain technology simplifies the process and makes it almost instant — to only a few minutes. Typically, this process takes a few days.
ICICI Bank executed these pilot transactions via its blockchain network with Emirates NBD on a custom-made blockchain application, co-created with EdgeVerve Systems, a wholly owned subsidiary of Infosys”
The year 2017 marked a huge milestone for blockchain in India as the governments sat up and took notice of the apparent distinct advantages of blockchain.
The years 2018 and 2019 were the years where the blockchain ecosystem of India caught up with the global advancements in blockchain.
Source : Avasant India Blockchain Report.
Regulatory timeline for blockchain in India.
The legality or the regulatory stance of India on cryptocurrencies can be categorized under two parts:
- Judicial Approach
- Central Bank approach
Judicial Approach
India has a curious relationship with blockchain. On the one hand, the Indian government is a huge proponent of blockchain technology but the government is non-committal on its stance towards cryptocurrencies with multiple drafts in the last couple of years with no bills passed.
These measures and uncertainties have met with major protests from the Indian ecosystem and the bill defining the cryptocurrencies are still in a cryostage with no certainty of regulations or the lack thereof.
Central Bank Approach
The Reserve Bank of India, India’s Central Bank has 4 circulars regarding Virtual Currencies and the content in all of them revolve around the same theme of caution.
“The Reserve Bank of India has today cautioned the users, holders and traders of Virtual currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.”
The biggest weapon in all the naysayer media has been the circular released by the RBI on April 06th, 2018 titled, ‘Prohibition on Dealing in Virtual Currencies’.
This is the full text of the circular and it specifically describes that because of the associated risks, “ONLY entities regulated by the RBI shall not deal with Virtual Currencies and its services”. This does not make the cryptocurrencies illegal, but just describes a stance taken by the Reserve Bank of India which can be subject to changes once the judiciary updates its status.
Supreme Court Verdict: The Supreme Court on Wednesday, 4th March, 2020 have struck down the curb on trading cryptocurrencies, earlier imposed by RBI(Reserve Bank of India).
