Despite India being one of the world’s fastest technology hubs, the nation’s regulators have had a hesitant stance towards Bitcoin and other cryptocurrencies over the past few years.
In the middle of 2019, per a document shared by Bloomberg Quint, 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.
Although nothing ever came of this seeming draft bill (other than fear amongst the industry), what was confirmed was that the Reserve Bank of India (RBI), the nation’s central bank, had prohibited banks and other financial institutions from dealing with those entities that use cryptocurrency.
While this move may not seem that serious — especially considering the industry’s catchphrase “be your own bank” — this was a de-facto ban for crypto exchanges, which was proven when exchanges like Zebpay announced they were departing the Indian market, and Bitcoin ATM providers.
And due to this, fiat inflows from the Indian market to the cryptocurrency market ground to a halt.
But, this has just changed with a new ruling from India’s Supreme Court, which is responding to inquires from cryptocurrency exchanges and other pro-Bitcoin entities, who have argued that the RBI’s ban was over the top.
India’s Supreme Court Just Reversed a De-Facto Bitcoin Ban
In a ruling Wednesday, India’s Supreme Court reversed the anti-crypto restrictions imposed on the industry by RBI. This move allows banks to facilitate banking transactions with industry entities once again, “removing a major hurdle for the development of the sector,” as put by Reuters.
Indeed, Bloomberg’s analysis of the Supreme Court’s move explained that Wednesday’s ruling means “virtual currency investors and businesses [can] push against stricter rules being planned by a skeptical government,” adding that any future regulations determined for India’s Bitcoin industry are likely to be less stringent now that the RBI ban is no longer. Vaibhav Kakkar, a partner at law firm L&L Partners explained:
With this order, there is a likelihood of more mature and balanced regulation of cryptocurrencies and the fintech sector as a whole.
This was echoed by Kunal Barchha, co-founder of CoinRecoil.com, who said that this ruling confirms Indians involved in cryptocurrency “won’t be judged as criminals.”
It isn’t clear how fast crypto exchanges will adapt to the new regulations, though there seems to be pent-up demand for Bitcoin and other digital assets in the Indian population.
In August 2019, a report from Financial Express, an India-centric finance news outlet, revealed that 10% of the “high net-worth individuals” respondents to a Hurun India survey want to purchase Bitcoin or other cryptocurrencies over the next three years. This made cryptocurrencies the fourth most-popular asset class (behind real estate, stocks, and fixed-income instruments like bonds) for this demographic of Indians.
India-Centric Crypto Assets Already Reacting
While today’s ruling is long-term positive for all cryptocurrencies, the news has immediately affected blockchain projects (and their respective digital assets) focused on providing value to the Indian market.
For instance, Matic Network, a decentralized application-focused blockchain that has a team based in India, is up 22% since the news came out.
Bitcoin hasn’t budged much, with its price remaining effectively flat since the release of the Bloomberg report. Though, Matthew Graham of Sino Global Capital thinks crypto should be moving more due to the India news because of its long-term ramifications for fiat inflows into this market.
Help me understand why the market isn’t reacting more to the India news
— Matthew Graham (@mattysino) March 4, 2020