There are reports that the Reserve Bank of India (RBI) is behind the call to completely ban bitcoin and cryptocurrencies in India.
This revelation comes amid the recommendation by the government instituted committee tasked with evaluating crypto regulations in the country calling for a blanket prohibition on virtual currencies.
Meanwhile, crypto stakeholders both within and outside the country say the government would be making a massive mistake if follows through on outlawing cryptocurrencies in India.
No End to Central Bank’s Beef with Bitcoin
According to the Business Standard, India’s apex bank and not the central government is behind the recommendation to ban bitcoin and cryptos in the country. On Monday (July 22, 2019), the inter-ministerial committee set up to look into crypto regulations in India submitted its report calling for a blanket prohibition of virtual currencies in the country.
The top hierarchy of the RBI says bitcoin creates “a chain of black money.” This characterization of cryptos as being enablers of criminal activities is one that is present in many jurisdictions across the globe. Several anti-crypto voices espouse this sentiment despite the fact there is little evidence to back up the claim.
Additionally, mainstream finance continues to be the conduit for illicit activities across the globe. Major banks like Wells Fargo, JPMorgan, and Deutsche indicted on money laundering charges certainly didn’t use crypto.
It will be recalled that the RBI did strike the first salvo in the war on cryptos in India. Back in 2018, the apex bank banned commercial banks from offering services to cryptocurrency exchanges in the country.
Gov’t Reportedly in Favor of More Nuanced Regulations
For government officials like Subhash Chandra Garg, banning bitcoin and cryptos isn’t the right course of action. The Economic Affairs Secretary and head of the inter-ministerial committee (IMC) charged with looking at modalities for regulating cryptos reportedly argued for a more nuanced approach to virtual currencies.
Business Standard quotes Garg as saying that bitcoin and cryptos constituted an economic phenomenon. Thus, rather than instituting a bitcoin ban, the government ought to find a way to regulate the industry for the benefit of all stakeholders.
In the absence of sensible crypto laws, the country’s virtual currency sector continues to suffer. Several bitcoin exchanges have shut down their operations in India with some relocating to friendlier jurisdictions.
Commercial banks have even joined in the campaign against crypto in India. There have been reports of some banks terminating accounts of customers engaged in cryptocurrency transactions.
Bitcoin Ban Looms in India
With the IMC submitting its report on Monday, there have been fears that India is one step closer to banning bitcoin completely. Across the world, there have been strong reactions to the news with stakeholders condemning the apparent direction of the matter.
Tweeting on Monday, Anthony Pompliano of Morgan Creek Digital expressed concern at the latest developments from India concerning crypto. One of the more troubling elements from IMC’s recommendations come in the form of financial fines and penalties for people caught engaging in cryptocurrency transactions.
We need to pay attention to what is happening in India around cryptocurrency regulation.
I’m willing to fly to meet with lawmakers and regulators if someone can get me a meeting.
Who can help?
— Pomp 🌪 (@APompliano) July 22, 2019
This proposed proviso is in keeping with rumors of prison sentences for crypto dealing in India. Such a stance might take India’s crypto aversion beyond that of other hostile places like China.
While calling for a crypto ban, the IMC recommends that the government take steps to adopt blockchain technology. The blockchain, not bitcoin approach also provides some evidence of the RBI being firmly responsible for the push towards a bitcoin ban.
The RBI released a regulatory sandbox for fintech earlier in the year which included blockchain startups but excluded crypto-related businesses.