The usage of digital currencies like Bitcoin and Ethereum is not banned in the country. Only local banks which are working with the central bank that is essentially the overwhelming majority of the banks within the country are not authorized to work with crypto exchanges.
While it might be in the regulatory grey area, it’s not yet against the law for crypto traders to buy or sell bitcoin via local OTC (Over-the-Counter) exchanges and P2P trading platforms using cash, as long as local banks aren’t involved in this.
Zebpay, a local exchange, said at the time –
“If Zebpay bank accounts are disrupted, rupee deposits and withdrawals will become impossible…[However] Crypto deposits and withdrawals are continuing as usual. The RBI circular only talks to banks, and other regulated entities about shutting accounts. This doesn’t affect BTC and other cryptocurrencies.”
Ultimately, the weekly volume of P2P exchanges, following the cryptocurrency exchange banking blockade, increased noticeably.
Indian Officials Positive on Cryptocurrency
While the central bank of India has pushed for a blanket ban on virtual currency trading and many Govt. officials have agreed with it, the sentiment around digital currencies has commenced changing in recent months.
The Department of Economics Affairs, led by Finance Secretary Subhash Chandra Garg – that leads a committee which is composed of RBI, Ministry of Electronics and Information Technology, and SEB officials – is believed to have reached a consensus on not dismissing cryptocurrencies completely as illicit methods of payment.
As indicated by the New Indian Express, a committee official said –
“We have already had two meetings. There is a general consensus that cryptocurrency cannot be dismissed as completely illegal. It needs to be legalized with strong riders. Deliberations are on. We will have more clarity soon.”
Bitcoin Banking Could Be Legalized Followed by Money Laundering Concerns
If the Indian government is concerned about potential money laundering risks, then there exists a possibility that the country may reverse the RBI’s ban on banks dealing with crypto exchanges.
If crypto trading moves towards P2P platforms, then it becomes daunting for the government to prevent the usage of digital currencies in processing illegal proceeds from criminal activities.
Amid a period in which the G20 is gearing towards regulation of crypto exchanges, it might be challenging for India to exclude itself from the global market.
Could Japan Shape India’s New Cryptocurrency Regulations?
In September 2018, Securities and Exchange Board of India was reported to send its officials to Japan for the purpose of understanding the regulatory frameworks better imposed by Japan.
Japan is known for its pro-crypto as well as blockchain policies and has facilitated the growth of its crypto exchange market well in the past two years.
The government of Japan and it’s FSA (Financial Services Agency) implemented a strict verification process to filter out poor cryptocurrency exchange to strengthen its market.
If money laundering is the major concern of the Indian government, then it may lean towards the legalization of bitcoin and crypto trading with rigorous regulations in place.