Regulation is one among the most important hurdles for crypto in India as exchanges continue the legal battle to determine a transparent framework.
It was early in March when India’s Supreme Court delivered a historic verdict on a landmark case that promised a replacement era for crypto in India. The Supreme Court moved to lift the Federal Reserve Bank of India’s controversial ban on banks issuing services to crypto-related firms.
It seems, however, that not all banks are complying with the new ruling. consistent with Mohammed Danish, a fintech lawyer, there are reports of several cases where banks have continued to say no crypto-related transactions. “In most of the cases, the banks haven’t given any written language but verbally informed their customers that they’re expecting RBI notification,” Danish said.
India’s crypto industry isn’t out of the woods yet
Following these developments, several crypto exchanges in India have collectively reached bent the country’s supreme court and penned a letter to the RBI, seeking regulatory clarity and inquiring on whether their operations are subject to the national Goods and Services Tax. India’s crypto exchanges are seeking this information so as to avoid complications with the nation’s tax authority.
Amid the shortage of regulatory clarity exempting digital assets from GST, experts predict a standoff between exchanges and therefore the Indian tax authority. Additionally, if India’s crypto exchanges are required to suits GST on every transaction, experts are adamant that the majority platforms handling crypto payments won’t survive long. during a conversation with Cointelegraph, Sumit Gupta, the co-founder of crypto exchange CoinDCX, noted that the exchange is functioning hard to get a positive verdict.
Although research indicates that the crypto industry worldwide is predicted to grow overall, consistent with Preetam Rao, co-founder and CEO of blockchain development company QuillHash, some banks still believe the cryptocurrency market is essentially unregulated and lacks a group standard for Know Your Customer measures, data protection and a regulatory framework for addressing crypto frauds. this is often to not mention the resistance from the RBI that India’s crypto community has got to affect in its go after a positive regulatory framework. Rao also mentioned that the RBI has created tons of negativity on the matter, therefore the verdict remains out on whether or not they will respond positively.
Rao also believes that despite the worldwide crisis brought on by the COVID-19 pandemic, the Indian people haven’t lost faith in cryptocurrency. He said during a conversation with Cointelegraph: “The way forward for crypto is bright in India, even during this phase CoinDCX gained 10x active users in March alone.”
Regulatory uncertainty isn’t exclusive to India
The case of regulatory uncertainty in India just about reads from an equivalent script as that of the us and Europe. Regulatory uncertainty hangs sort of a dark cloud over the crypto industry generally . only recently , the U.S. Crypto-currency Act of 2020 was introduced, a law that seeks to categorize and clarify federal oversight laws on digital assets.
The bill was presented on March 9 by Paul Gosar, a U.S. Congressman from Arizona. consistent with Will Stechschuite, Gosar’s legislative assistant, the bill will provide regulatory clarity additionally to giving “legitimacy to crypto assets within the us .” However, the proposal attracted mixed feedback thanks to its categorizations, with some critics arguing that the bill was “Dead on Arrival.” One critical tweet from Jerry Brito, Coin Center’s executive , reads: “It’s not a significant bill and has almost zero chance of moving but should be opposed on principle.”
In the European Union , the 5th Anti-Money Laundering and Combating the Financing of Terrorism rules that now apply to crypto custodians has pushed some companies to pack up , while others have relocated out of the EU. The regulations require crypto custodians, wallets and exchanges to implement Know Your Customer procedures and monitor transactions continually, arguably undermining crypto’s core principles of anonymity.
On Indian banks denying services to crypto-related firms despite the Supreme Court ruling, Sharat Chandra, who is one among India’s blockchain evangelists and an emerging tech advisor, shared his opinion with Cointelegraph: “Indian banks are expecting a politician word from the Federal Reserve Bank of India as far as crypto related transactions are concerned.” Also providing some insight was Dileep Seinberg, CEO and founding father of Exioms blockchain technology company, who told Cointelegraph:
“Adoption of latest technologies and understanding its impact [on Fintech especially Banks] has always been a challenge at a worldwide scale. Understanding the facility of Blockchain technology on banking and the way the New Money will work took a couple of years within the western world.”
Indians are ready for crypto
While the remainder of the planet continues to fight the economic effects of the coronavirus pandemic, the cryptocurrency market has experienced peak trading volumes within the past few weeks in select countries as evidence of a revival.
As governments across the planet print extra money to stimulate the worldwide economy, industry watchers like Rao believe that more people will look to crypto as an alternate . Rao noted that in India, “people are talking a few global currency and searching for an alternate to INR and USD.” He further explained:
“Their main point of concern is inflation, unlimited supply of fiat currency thanks to printing of cash , and central bank’s move to scale back interest rates.”
Rao also noted that there are currently 5 million active crypto users online and offline in India, to not mention crypto communities, dedicated publications and over 20 active exchanges and social media campaigns. In essence, while the regulatory uncertainty persists, Rao believes that awareness about cryptocurrency is spreading and thus further boosting a crypto revival within the coming years.
Seinberg also told Cointelegraph that he remains optimistic which despite the “conservative approach on regulation, […] India will become a serious marketplace for cryptocurrency as it’s been seen with the Payment Wallet industry.”
Seeking regulatory clarity
The crypto industry goes through a revival process in India, and albeit regulatory uncertainty is rampant, there’s a crypto community wanting to adopt digital currencies, with some banks already beginning to work with crypto-related firms. Multiple exchanges in India, like WazirX, CoinDCX and PocketBits, are still accepting fiat deposits and withdrawals while working closely with banks.
As the country’s exchanges seek clarity, the longer term of crypto in India hangs by a thread. it’s anyone’s guess whether the country’s regulators will choose progressive reforms or a regressive regulatory framework. However, Chandra believes that the GST council might include cryptocurrencies under its umbrella as a way to boost tax revenue:
“Due to the Covid-19 outbreak, economic activity has been minimal and tepid GST collection figures tell a telling tale. Economic recovery will take longer than usual. GST on cryptocurrency trade will help in shoring revenues for the govt .”
In the meantime, however, Chandra suggests that crypto companies should still take legal recourse to force banks to follow the ruling by the apex court.
Formulating a positive regulatory framework
According to Seinberg, cryptocurrency adoption will happen fast, and “India is simply expecting the proper nudge.” Ultimately, the simplest outcome is one where regulators in India provide crypto firms a transparent set of rules for a healthy business environment. For now, India’s crypto community remains resilient and optimistic. Gupta believes that “this confusion [with the banks] are going to be resolved during a matter of your time .”
Also, while chatting with Cointelegraph, Sathvik Vishwanath, the CEO of India’s Unocoin exchange, noted that after the coronavirus pandemic, the stifled state of India’s crypto industry will resume the momentum it had picked up after overcoming the RBI ban. Chandra believes that within the short term, crypto payments will become more acceptable: “In the post-pandemic era, digital and crypto-related payments will rule the roost. As more and more banks are warming up to CBDCs [central bank digital currencies].” Chandra added:
“I strongly believe RBI would shed its inhibition and join the league of other central banks in furthering the explanation for financial inclusion by leveraging digital currencies.”