There is a high possibility that the Indian government may consider the cryptocurrencies to be legal following the conclusions of the government’s inter-ministerial committee (IMC). The First inter-ministerial committee, that was formed in March 2017, had recommended a complete ban on cryptocurrencies and termed them illegal. However, the second committee, which was formed in 2018, observed that the cryptocurrency could not be dismissed as completely illegal (in a marked change from their predecessor’s stance). They further concluded that the cryptocurrencies can be legalized with the creation of strict terms & conditions with regards to its use and operations. The deliberations are still ongoing and the committee is expected to submit its comprehensive report to the government by February 2019.
Thus, 2019 may turn out to be an auspicious year for the cryptocurrency holders and dealers in India who have been facing a torrid time since April 2018. On 3rd April 2018, the Reserve Bank of India (RBI) had cautioned all the digital currency holders against dealing in them stating that:
“RBI shall not deal with or provide services to any individual or business entities dealing with or settling virtual currencies”.
It had directed all banks under its purview to wind up, within three months, any existing banking relationships with virtual currency exchanges and traders. This was a big blow to every institution and individual dealing in virtual currencies, in whatever capacity, in India as they were left with two options – Quit or Transfer.
For the issue about quitting, the investors had to divest their holdings into legitimate assets & investments or get their virtual currencies converted into actual currency through their crypto exchange within the stipulated time frame provided by the RBI. In case of transfer, the crypto holders had the option of transferring their holdings in an Indian crypto exchange to a foreign crypto exchange. However, these processes (particularly the former one) caused a lot of harassment to the crypto holders as an atmosphere of uncertainty was created in India. This was further aggravated by the falling prices of Bitcoins and increased amount of regulatory hurdles that the virtual currencies faced in other global economies. It even compelled one of India’s biggest cryptocurrency exchanges, Zebpay, to shut down as it was unable to cope up with the banking freeze imposed by the RBI.
Now the committee seems to have realized that the blockchain is the next big thing in field of technology (after internet & smart devices). Cryptocurrency is going to be the future mode of exchange for the masses as it is secure, transparent, less costly, easily available and faster than the conventional mode of transaction. In fact, India has already completed its first blockchain transaction in November 2018 when, a shipment was facilitated between Reliance Industries of India and Tricon Energy of USA with a blockchain enabled Letter of Credit execution between HSBC Bank (India) & ING Bank (Brussels) using R3’s Corda blockchain platform. A transaction that usually takes 7-10 days for execution in the conventional method took less than 24 hours using the blockchain technology.
The root cause behind the “illegal” status of cryptocurrencies in India is the result of the government’s failure to keep up with the rapid technological changes. This led to the rise of various fraudulent crypto exchanges who simply siphoned off the investor’s wealth after offering them fake ICOs. Hence, the cryptocurrency in India may be legalised with huge amount of regulations by the regulatory body of India. This is because the Indian government as well as the RBI feel that the virtual currency raises concerns about consumer protection, market integrity and money laundering. Therefore, the crypto exchanges in India should brace themselves for the regulatory challenges. Nevertheless, the overall perception about the cryptocurrency is positive in India as well as the rest of the world.