The government of India is exploring the possibility of legalizing cryptography and regulating exchanges.
Several local publications reported that the government of India is exploring the possibility of regulating cryptography.
At a formal government meeting organized by an interdisciplinary committee, a task force led by members of the Ministry of Economy and Information Technologies and the Ministry of the Interior, the committee decided in favor of regulating cryptocurrency using strict rules.
Sudden change in position to crypto
In April, the Reserve Bank of India (RBI) imposed a general ban on cryptocurrency trading, banning the country's financial institutions from doing business related to cryptocurrency.
An unexpected ban on the exchange of cryptocurrencies, introduced by the country's central bank, in fact did not allow trading platforms to receive banking services from local financial institutions.
Several exchanges tried to turn the cryptocurrency trade into cryptocurrency, but with the dominance of Binance, OKEx, Huobi and other cryptocurrency exchanges, local platforms for trading digital assets could not compete and closed their business.
At that time, RBI threatened to break off relations with any local bank that deals with the exchange of digital assets. The circular issued by the central bank read:
“In view of the attendant risks, it was decided that, with immediate effect, RBI regulated entities should not deal with or service any physical or business entities dealing with VC (or virtual currencies). Regulated organizations that already provide such services must withdraw from the relationship within a certain time. ”
In July, industry leaders, associations and companies challenged the controversial decision of the RBITE by filing a complaint with the Supreme Court of India. Within a few months after the application was submitted, the court ruled in favor of RBI, allowing the central bank to impose a ban on cryptocurrency trading.
However, on December 26, a senior government official told The New Indian Express in an interview that the government believes that cryptocurrency cannot be rejected as illegal currencies, and the asset class should be governed by strict rules.
“We already had two meetings. There is a general opinion that a cryptocurrency cannot be rejected as completely illegal. It should be legalized with strong riders. Discussions are ongoing. Soon we will have more clarity, ”said the official.
The change in the position of the government of India in relation to cryptocurrencies is probably due to the recognition of risk in the unregulated cryptocurrency trade. Having banned the exchange of digital assets, it forced investors to exit from the self-regulating market to unregulated peer-to-peer and over-the-counter markets that are difficult to regulate and control.
If the government’s goal is to prevent money laundering using cryptocurrency, a more effective way to do this is to allow cryptocurrency to be traded on exchanges using the strict Know Your Customer (KYC) and Anti-Money Laundering (AML) systems. ,
When can this happen?
In the past, many reports were published in which the government of India was supposed to legalize cryptocurrency. However, the government showed no sign of asset class regulation in the last 12 months.
With the G20, who agreed to regulate cryptocurrencies to combat money laundering, India, which is part of the G20, can follow the global trend of asset class regulation.
Given India's history in the field of cryptocurrency, it can take from several months to potentially years before cryptocurrency trading revives and is completely legalized by stable banking services provided by local financial institutions.
At a formal government meeting organized by an interdisciplinary committee, a task force led by members of the Ministry of Economy and Information Technologies and the Ministry of the Interior, the committee decided in favor of regulating cryptocurrency using strict rules.
Sudden change in position to crypto
In April, the Reserve Bank of India (RBI) imposed a general ban on cryptocurrency trading, banning the country's financial institutions from doing business related to cryptocurrency.
An unexpected ban on the exchange of cryptocurrencies, introduced by the country's central bank, in fact did not allow trading platforms to receive banking services from local financial institutions.
Several exchanges tried to turn the cryptocurrency trade into cryptocurrency, but with the dominance of Binance, OKEx, Huobi and other cryptocurrency exchanges, local platforms for trading digital assets could not compete and closed their business.
At that time, RBI threatened to break off relations with any local bank that deals with the exchange of digital assets. The circular issued by the central bank read:
“In view of the attendant risks, it was decided that, with immediate effect, RBI regulated entities should not deal with or service any physical or business entities dealing with VC (or virtual currencies). Regulated organizations that already provide such services must withdraw from the relationship within a certain time. ”
In July, industry leaders, associations and companies challenged the controversial decision of the RBITE by filing a complaint with the Supreme Court of India. Within a few months after the application was submitted, the court ruled in favor of RBI, allowing the central bank to impose a ban on cryptocurrency trading.
However, on December 26, a senior government official told The New Indian Express in an interview that the government believes that cryptocurrency cannot be rejected as illegal currencies, and the asset class should be governed by strict rules.
“We already had two meetings. There is a general opinion that a cryptocurrency cannot be rejected as completely illegal. It should be legalized with strong riders. Discussions are ongoing. Soon we will have more clarity, ”said the official.
The change in the position of the government of India in relation to cryptocurrencies is probably due to the recognition of risk in the unregulated cryptocurrency trade. Having banned the exchange of digital assets, it forced investors to exit from the self-regulating market to unregulated peer-to-peer and over-the-counter markets that are difficult to regulate and control.
If the government’s goal is to prevent money laundering using cryptocurrency, a more effective way to do this is to allow cryptocurrency to be traded on exchanges using the strict Know Your Customer (KYC) and Anti-Money Laundering (AML) systems. ,
When can this happen?
In the past, many reports were published in which the government of India was supposed to legalize cryptocurrency. However, the government showed no sign of asset class regulation in the last 12 months.
With the G20, who agreed to regulate cryptocurrencies to combat money laundering, India, which is part of the G20, can follow the global trend of asset class regulation.
Given India's history in the field of cryptocurrency, it can take from several months to potentially years before cryptocurrency trading revives and is completely legalized by stable banking services provided by local financial institutions.
