The regulatory stance on Bitcoin [BTC] and other cryptocurrencies continues to be in the grey area in India since the Reserve Bank of India [RBI] – the central bank, announced that virtual currencies are “not a legal tender” in the country. The country is well-known for being the largest democratic country in the world, with the term ‘Democracy’ defined as a government of the people, by the people and for the people.
The country has always taken pride in this, quoting that the people are the ultimate powerhouse driving the country forward. Since India is the seventh-largest country in the world and the second in terms of the population, it is quite difficult to have every single person participate in the decision that would either make or break the country. In order to solve this, the election mechanism was introduced, where an individual will have to elect a person who will be acting as their representative and make decisions that represent their ideology and the ones that would benefit the country.
However, in some scenarios, the regulatory bodies of the country decided to take the opposite path, with the RBI’s stance on Bitcoin [BTC] and other virtual currencies being a fine example. This move by the central bank stands against the very constitution the nation is built on and clips off an individuals freedom of choice.
In the month of April 2018, the Central Bank of India released a statement pertaining to virtual currencies. The bank stated that cryptocurrencies “raise concerns” of consumer protection, money laundering, and market integrity. They added that users active in the cryptocurrency space have been warned about the dangers associated with cryptocurrencies on several occasions.
“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time [3 months],” said the Central Bank of India
This announcement was followed by a huge uproar in the cryptocurrency community in India. This was mainly because of the action taken by the RBI without a solid ground to back it up with. It eventually resulted in the Central bank being dragged to the Supreme Court. Additionally, the bank was also criticized by the High Court of Delhi, remarking this action as “unconstitutional” and has ordered the bank to present the grounds on which it has prohibited other banks to provide services to individuals and business associated with cryptocurrencies.
The decision made by the RBI has a direct impact on the economy of the country. If the RBI had not taken this decision, cryptocurrency would have opened doors for more jobs, technological development in the country, and, importantly, monetary revolution. Since its the opposite, the ruling has resulted in several businesses tumbling in the market including Zebpay, a cryptocurrency exchange which was once a leading exchange platform in India.
The central bank that shut down one of the most-sought out means of participating in the cryptocurrency space now added the report by FSB on cryptocurrencies in their latest report, which states that they “may not currently pose systemic risks”. In a report the central bank said:
“The FSB has undertaken a review of the financial stability risks posed by the rapid growth of crypto-assets. Its initial assessment is that crypto-assets do not pose risks to global financial stability currently. The market continues to evolve rapidly, however, and this initial assessment could change if crypto-assets were to become more widely used or interconnected with the core of the regulated financial system.”
This effectively means that the central bank has thrown out the main reason it used to block the financial institutions support to everyone involved with Bitcoin [BTC] and other cryptocurrencies. Additionally, the Reserve Bank of India has still not disclosed the exact reasons for the action as ordered by the Delhi High Court.
This also contrary to the Prime Minister of India, Narendra Modi’s dream of ‘Digital India’. The movement was launched in the year of 2015 but rose to fame because of the 2016 demonetization. On November 8, 2016, at 20:15 IST, the PM of India announced that INR 500 and INR 1000 notes [two of the strongest denominations] would no longer be considered as a legal tender. The decision taken to cramp down corruption led to a major cash crunch in the country and also had a massive impact on the economy.
Because of all the inconvenience and distress caused by the movement, the dream of Digital India was sold to everyone in the country, and digital payments took the spotlight. This campaign is the very reason for the success of Paytm, a payment and digital wallet service provider in India.
At present, the fate of cryptocurrency lies in the hands of the Supreme Court of India. The court hearing on the same is scheduled for January 15, 2019.