The government of India is considering a ban on crypto in the country. A report by a local news agency said that the ministry of finance has begun inter-ministerial consultations on the creation of an effective legal framework to ban crypto.
A Response to the Supreme Court Ruling
India first tried to ban crypto via a Central Bank circular that prohibited banks from dealing in crypto. However, that move failed after the Supreme Court quashed the directive. The central bank has since vowed to challenge the reversal of its directive. However, that might no longer be necessary. In response to the Supreme Court’s ruling, lawmakers have decided to create a legal framework that will deal an effective blow to the crypto sector. According to the media report, the circular by the finance ministry will be sent to the cabinet for consultation. Later, it will go to the Indian parliament.
How the Ban will Work
The legal framework from the consultations could end up being similar to a proposed bill by the inter-ministerial committee. The proposed bill was published in July 2019. It had proposed some strict enforcement measures including the lengthy jail sentences for those who violated it. The bill was eventually shelved and it did come up for a vote in India’s parliament. Those operating in India’s crypto sector had been hoping that with the Supreme Court ruling, lawmakers would reconsider their proposed ban.
The Supreme Court Ruling
When making its ruling, the Supreme Court said that the Central Bank of India had failed to show evidence there was any damage to the financial system. This was in response to the Central Bank’s argument that crypto would cause irreparable damage to the financial system of India. Additionally, they had argued that crypto could be used to facilitate money laundering and terror financing.
India’s Banking Sector Not Been Welcoming
While the Supreme Court reversed the de-facto ban on crypto trading, things have still been quite tough for the crypto sector. Many in the crypto sector have complained that Indian banks have refused to avail their services to them.
The banks claim that the reason for their refusal to offer services to the sector is because of a lack of clarification by the Central Bank. However, various avenues have been found to facilitate crypto trading, according to those operating in the sector.
How Soon Could the Ban be Imposed?
In the initial proposal, a ban of 5 to 10 years had been proposed for those who violated the law. However, that law was proposed in February 2019 and since then, nothing has happened. Consequently, unlike the sudden and unexpected ban by the Central Bank, the implementation of the law could be a gradual process. Besides that, the process will provide avenues for public consultations on how the ban should work. It will be an opportunity for experts in the crypto sector to submit proposals on how the sector should operate.
Eventually, it could end up being something similar to what took place in South Korea. Initially, the country had proposed a total ban on crypto. However, after lengthy consultations, South Korea passed one of the most comprehensive crypto laws in the world. Alternatively, it could end up being similar to China’s model where crypto trading is banned while the country remains a leader in crypto mining.
India Crypto Visionaries Believe Positive Regs Will Come
Founder of WazirX and well known crypto India visionary, Nischal Shetty believes crypto will end up flourishing in India long term. In a recent tweet, Nischal said “The level of understanding & motivation our ministers have for innovation is commendable. Having met & discussed Crypto with few of them, I’m confident we’ll see positive Crypto regulations in India.” This was in response to NY State Senate candidate Oz Sultan, who stated that:
“It helps that the government of India started loosening some of their perspective on Crypto. Legislators I spoke with in Goa were in favor of a digital currency to build tourism. Once they sort out The tax question, mass adoption will most likely come.”
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