The crypto ecosystem has been doing news rounds ever since the RBI proposed a ban on using or trading or holding Crypto currency in 2018. It was all cloudy for the crypto investors until recently when the Supreme court in 2020 quashed the ban on trading on virtual currencies.
RBI has been reluctant to let the crypto currencies co-exist in the Indian economic system. Crypto currency is a booming sector and has put so many miners on the map.
So why is RBI not allowing crypto trade in India? Will it ever oblige? How is crypto business coming along in India? We answer all these questions in this post. Read on to find out more.
The Crypto BAN
In 2018, RBI issued a circular to take down crypto currencies from the Indian virtual trade. The Internet Mobile Association Industry- a non profit organization and a group of corporations dealing in crypto exchange platforms stood up against this circular in the Supreme court.
RBI, in a Financial Stability report, defined virtual currency as unregulated digital money which is controlled and issued by its developers and accepted by a specific community. RBI exercised its power to ban private digital currencies and their trade/circulation through any financial institution in India.
However, in March 2020, this circular was quashed by the Supreme court saying that though RBI has the authority to regulate virtual currencies, it was disproportionate to impose prohibition on trading of crypto and therefore, ultra vires the constitution.
Why RBI wants Crypto Ban?
According to the survey of Unique Identification Authority of India (UIDAI), the government has issued over 122 crore Aadhar cards as of March 2020. That means it has covered 90% of the population and out of 110 crore bank accounts in India, 96 crore are linked to Aadhar.
This could be one of the reasons for banning crypto since it is rumored that RBI wants to launch a digital currency of its own and is sparing the competition. The said digital currency is to be called Lakshmi-named after the Goddess of wealth.
RBI has been pretty stringent with its ban on crypto. According to the “Banning of crypto currency and regulation of official digital currency bill 2019” , the draft sentences 10 years of prison to anyone who mines, circulates or holds private digital currencies. This sentence surpasses the 7 years of imprisonment for money laundering.
The Supreme Court’s decree paved way for some relief as it states that virtual currencies are not legal tender but tradable commodities and lacks precise definition and the RBI circular has disproportionately invaded the investors’ rights.
How Crypto Ban affects Indian Economy?
Crypto, especially Bitcoin seems to have come around with the retail investors in India. More than 5 million Indians have invested in Bitcoin.
Crypto is not just being used as exchange in restaurants, shopping, payments and insurance but has now become a prominent source of funding for start ups in India. Start ups are longingly looking at Initial Coin Offering (ICO) as fund raising options. But the situation is contemplating since the ban was announced.
Almost 30 to 40 start up companies from India have tried to pursue the ICOs. The ban has caused these companies to choose foreign jurisdiction and have raised funding from foreign investors.
The ban could bring uncertainty among the retail investors in India.
Nischal Shetty (CEO, WazirX) said - "Criminalizing digital tokens could destabilize existing businesses eroding the wealth of millions"
Major Crypto Startups in India
Crypto startups are developing slowly and steadily because of the regulatory reforms in India. Though India has been gaining exposure on the global front, the traditional methodology of the government seems to hold back a few areas such as the crypto economy. Despite this, there are a few Crypto startups which are propelling and being recognized.
The Mumbai based startup provides users with various crypto based financial products. Users can buy and sell more than 100 coins instantly with INR.
Nuo is a decentralized finance (DeFi) application that converges sellers and borrowers through smart contracts. Nuo network has also launched a new digital banking platform called Juno, which is built on top of Ethereum and depends on Nuo protocol for Nuo banking services.
WazirX is the leading crypto exchange platform in India at present. It was the first exchange in India to introduce a native token called the WazirX token (WRX) which has resulted in significant growth of engagement on the platform.
#IndiaWantsCrypto - Campaign
Crypto companies WazirX and CoinDCX along with several others are running a hashtag campaign #IndiaWantsCrypto on twitter to raise awareness about the bill and its consequences. The campaign has already found support from several start-up founders and angel investors such as Sahil Lavingia, Rajiv Mantri and Balaji Srinivasan.
Crypto Ban - Opinions
The sovereign insists on not having private crypto currencies in the Indian ecosystem since it considers crypto as something that is foreign and threatens security of its citizens. Finance Secretary Ajay Bhushan Pandey in an interview said that crypto currency is unconstitutional as it is produced outside India and cannot be treated as currency but a commodity.
Although the government might not completely impose a ban on crypto, the law intends to create a facilitative framework under the guidance of RBI, exceptions will be provided to promote the underlying technology of crypto currency and its uses. However, many of the retail investors think differently.
Ex CTO of Coinbase and General Partner at Andreessen Horowitz, Balaji Srinivasan, an entrepreneur and an investor, believes that crypto ban is as bad as internet ban. In an interview he said that eventually in the coming years India will have to accept crypto as it already co existing in other countries as an alternative currency. India has great potential not just in terms of selling but also producing which makes it a strong contender amongst the developing nations.
Crypto Ban - FAQs
Why did RBI ban Cryptocurrency?
It is rumored that RBI wants to launch a digital currency of its own and is sparing the competition. The said digital currency is to be called Lakshmi-named after the Goddess of wealth.
What is Crypto Ban?
In 2018, RBI issued a circular to take down crypto currencies from the Indian virtual trade. According to the “Banning of crypto currency and regulation of official digital currency bill 2019” , the draft sentences 10 years of prison to anyone who mines, circulates or holds private digital currencies. This sentence surpasses the 7 years of imprisonment for money laundering.
What is #IndianWantsCrypto campaign?
Crypto companies WazirX and CoinDCX along with several others are running a hashtag campaign #IndiaWantsCrypto on twitter to raise awareness about the Crypto Ban bill and its consequences
Which are the major crypto startups in India?
Coin DCX, NUO, WazirX are some of the major crypto startups in India