Over the past few years, India has begun attempts to crackdown on its shadow economy, which the government feared was leading to a loss in tax collection, which is seemingly a byproduct of the country’s large reliance on cash and a relatively large unbanked population.
This culminated in an attempt at demonetizing banknotes above a certain value threshold. A report from the Reserve Bank of India (RBI) has indicated that 99.3% of the demonetized banknotes were deposited into banks, indicating that the attempt may have worked.
While some still debate that the cash ban failed, authorities in India have eyed other targets since the 2016 regulation, specifically looking at Bitcoin and other cryptocurrencies. The RBI on occasion has cited potential terrorist financing and money laundering as reasons to target digital assets, as have many other financial regulators.
In the middle of last year, there was that one document shared by Bloomberg Quint indicating that those who involve themselves in the “sale, purchase and issuance of all types” of crypto assets, including Bitcoin, could be subject to a ten-year jail sentence and/or fine.
But, it appears that none of this stringent regulation will be enacted. In fact, the RBI just confirmed it has no intention to ban the ownership of Bitcoin in India, seemingly quashing the document that circulated the web last year.
India Clarifies Crypto Stance
According to an article from The Economic Times of India, which cited a document from the RBI submitted to the country’s supreme court, the central bank has not officially prohibited any form of virtual currency in India:
“Firstly, the RBI has not prohibited VCs (virtual currencies) in the country. The RBI has directed the entities regulated by it to not provide services to those persons or entities dealing in or settling VCs.”
The document continued that instead of a full-fledged ban that some expected and the Bloomberg Quint document indicated, the RBI has “ringfenced entities regulated by it from being involved in activities that pose reputational and financial risks along with other legal and operational risks,” seemingly indicating that crypto exchanges are still heavily restricted or banned by the country.
Sonny Singh, CCO of BitPay, said in an interview with Bloomberg earlier this year that the legalization of Bitcoin in India could push the cryptocurrency higher, but it isn’t clear if this is the type of legalization or regulatory clarification he was hinting at in making this comment.
Similar Story In China: Owning Bitcoin is A-OK, Trading It Isn’t
India’s regulatory stance on Bitcoin and other digital assets is actually very reminiscent of that of China.
At one time, China was literally the world’s hub for all things Bitcoin; the industry’s once-largest company, Bitmain, was based in the country, mining power is centralized in that region, and some of the largest cryptocurrency investors came from China as evidenced in the once-large volumes (larger than they are now) on Asian exchanges.
But, in 2017, a crackdown on digital assets began that the People’s Bank of China said reduced publicly-reported trading volume between the Bitcoin and Chinese Yuan by 99%.
The crackdown continued in 2019, when the government sensed that a crypto economy had sprung up again.
This time, the PBOC forced a number of crypto exchanges to shutter their operations in China, with some reports (and my sources) indicating that a number of blockchain companies with their own digital assets were forced to find a new place to domicile their business.
While this trading ban is in place, one of the country’s local technology-focused courts ruled that Bitcoin is a form of property in China, meaning that it is legal to own, but to trade, maybe not so much.