The Indian parliament is considering a bill that seeks to ban cryptocurrencies in the country. The nation has maintained an ambivalent stance on the issue. While a survey by Nimbus concluded that India is the second country to encourage their use, the ban is on the lips of bureaucrats and its scrutiny is a priority in the Supreme Court itself.
India has been one of the countries where the Bitcoin industry has flourished. Crypto ventures of a considerable size such as WazirX, BuyUcoin, ConiDCX, Unocoin and Bitbns can be found in the Asian subcontinent.
International players have also entered the cryptocurrency industry, as is the case with Binance, which recently acquired WazirX.
The cryptocurrency industry also has allies, including several Indian technology guilds such as the National Association of Software and Service Companies (NASSCOM), the Internet and Mobile Association (IAMAI) and IndiaTech.
The main reasons why India seeks to ban cryptocurrencies
Although the Ministry of Finance tried to pass a law in Parliament to establish a formal regulation to the cryptocurrency sector, this did not prosper among lawmakers who still view with skepticism the digital currency that has been a scandalous protagonist in the Asian subcontinent.
In January, Karnataka state police in the city of Bangalore recovered 31 bitcoins stolen from a massive hack by a hacker named Srikrishna Ramesh, aka Sriki.
After his capture, Sriki led the police to believe that he transferred the stolen bitcoins to a law enforcement wallet, however, it turned out to be a ruse and the Bitcoins disappeared completely.
To make matters worse, the Bangalore city police chose to completely hide the scandal, so that when the scam that the state institutions themselves had fallen victim to was leaked to the press, a heated debate broke out in Parliament.
Apart from the fraud and scam scandals that have emerged in some crypto exchanges, there is also the regulatory issue. Many of the crypto exchanges offer the sale as a long-term investment.
According to the founder of the Centre for Public Policy Innovation, Dr. K Yatish Rajawat, “Normally, an entity selling investment options needs to register as an investment advisor with the Securities and Exchange Board of India (SEBI). But these cryptocurrency exchanges are bypassing that legal formality of registration or compliance.”
For Dr. Rajawat, the Indian government should not regulate cryptocurrencies, but ban them outright: “Crypto tokens as an investment or masquerading as a currency and crypto exchanges facilitating this investment are not technology — they are merely products based on a common concept, blockchain — even if they using different hashing technologies for encryption.”
Professor Rajawat argues that banks and the traditional financial system have encryption tools and use of blockchain, subject to existing Indian financial regulation, so cryptocurrencies themselves, do not represent a technological innovation.
Despite the opposition to cryptocurrencies, digital assets still have allies in Congress such as the right-wing Shiv Shen party, whose leader Priyanka Chaturvedi has openly opposed a ban on cryptocurrencies.
The Indian Central Bank is working on its own digital currency, so cryptocurrencies are seen as potential competition for the digital rupee.
With such dissimilar positions among Indian institutions between banning cryptocurrencies or regulating them, the future of this nascent sector is yet to be defined in the Asian subcontinent.