Indian Panel Proposes to Make It Illegal to Hold Unregulated Cryptocurrencies?

The story of 2018 is a number of regulatory changes that created a bearish market for cryptocurrencies. And though this is the case, many remain hopeful that regulatory clarity could attract institutional investors. Many also see regulatory changes as a necessity as it helps the market to mature.

Different countries have different reactions to cryptocurrencies. For instance, China decided to ban cryptocurrency-related activities. Crypto exchanges are banned in the country, not to mention malls and hotels are also recently prohibited from hosting crypto-related events.

Now, for India, according to Moneycontrol, a committee that is headed by India’s Economic Affairs Secretary, Subhash Chandra Garg may propose to amend the existing laws pertaining to holding cryptpo assets. According to the report, Subhash Garg-committee is in the final stages of deliberations to ban holding cryptocurrencies that are unregulated by the government.

Crypto Assets Should Be Out Of India’s Financial Ecosystem?

It isn’t new that the Indian government wanted to get rid of cryptocurrencies away from their financial ecosystem. The reason behind this is that it can be used in aiding illegal activities including Ponzi and multi-level marketing schemes and tax evasion cases.

The Subhash Garg-committee started last year. It is expected to submit its report before the end of the year, Besides the Economic Affairs Secretary, among the members of the committee, came from India’s central bank as well as the country’s securities markets regulator.

If the adoption of the report becomes a reality, we can expect India to impose a stricter stance on cryptocurrencies.

Prohibiting Crypto Business from The Banking System

In April, crypto businesses encountered a problem when the Reserve Bank of India (RBI) decided to prohibit financial institutions that the central bank regulates from transacting with crypto businesses. The financial institutions were also banned from allowing clients to buy cryptos. According to the statement issued by the RBI “…with immediate effect, entities regulated by the RBI shall not deal with or provide service to any individual or business entities dealing with or settling VCs (virtual currencies)”. In addition to this, the statement also added that “Regulated entities which already provide such services shall exit the relationship within a specific time”.

Effects of The Ban

The ban imposed by the RBI on financial institutions dealing with crypto businesses was felt months after. In September, one of the biggest crypto exchanges in the country, Zebpay decided to shut down its operators with no access to banking services because of the actions of RBI.

And it affected not only cryptocurrency exchanges. In fact, the entire blockchain ecosystem was affected.  It has led to a “blockchain brain drain” as well as a “blockchain capital flight”. Businesses sought to find other environments with better crypto regulations including that of Malta, Thailand, Switzerland, and Estonia.

Until today, regulatory changes in the niche are still happening. Unfortunately, regulators from different parts of the world have no single consensus on how to approach the crypto niche. Is it a good idea to ban cryptocurrencies or should it simply be regulated? But so far, the crypto market in India seems to be suffering in the hands of regulators.