These are turbulent times for followers of cryptocurrencies in India.
It has been just over 10 months to the day that the Supreme Court of India overturned the decision by the Reserve Bank of India (“RBI”) to prohibit banks from dealing with cryptocurrency exchanges. At the time, the Court ruling was greeted as a welcome reprieve for the crypto-industry, but cooler heads also cautioned that this would not be the final word on the subject. And it looks like they were right.
After months of some dithering, it seems like the forces that would seek to shackle the cryptocurrencies have returned. This time, a Bill promoting the establishment of a national digital currency and a concurrent ban on “private cryptocurrencies” has been tabled before India’s lower house (the Lok Sabha).
We at Zebpay will not sugar coat the issue for you because transparency and clarity are values we live by. These are serious challenges. The optimists among us have pointed out that the term “private cryptocurrencies” has not been defined, and hold out hope that perhaps some tokens might be left well enough alone. We hope so as well, but that being said we must also acknowledge that in previous pronouncements, notably in the Report of the Committee to propose specific actions to be taken in relation to Virtual Currencies, the Ministry of Finance has used that term to refer to any cryptocurrency that was “issued by private enterprises as opposed to sovereign entities”.
However, all is not lost. In healthy democracies, the tabling of a Bill is a prelude to vigorous discussion and debate on the merits of legislation, and in particular towards finding the right balance between private sector innovation and the need for Government to protect the financial sector. In that tumult, positions may be clarified, or shift or other voices within Government may voice alternative points of view. Already we are seeing real signs that the Ministry of Finance is shifting away from taking a hardline stance.
For instance, mere days after news broke about the prospective Bill, the Minister of State for Finance Anurag Singh Thakur was invited to respond to certain questions concerning the reach and intent of the Bill. On the issue of India issuing its own digital currency, the learned Minister clarified that “… the Government does not consider crypto-currencies legal tender or coins and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system”. This is a significant clarification. It may be the case that the nature of the prospective ban would merely be to prohibit (i) the use of cryptocurrencies as payment for goods and services in the real economy; and (ii) the use of cryptocurrencies as a means of transferring value between persons and/or out of the country. If so, that would leave untouched the legality of owning cryptocurrencies per se as well as the trading of cryptocurrencies as an investment activity. We shall have to wait and see if this is the current view of the Ministry, and on that note let us all hope that cooler, more forward thinking voices prevail.
–Kevin Lim is the Head of Legal for ZebPay