India's government waives crypto ban

After initially considering a ban on cryptocurrencies in India, the government opted instead for strict regulation of digital assets.

That the Indian government had announced last month that it was preparing a widespread ban on cryptocurrencies caused a bout of panic among crypto owners. Many of the investors were probably worried that they would no longer exchange their digital coins for the state currency, the rupee. As a result, the price of Bitcoin on WazirX, a popular crypto exchange in India, plummeted by close to 15 per cent in a very short time. But other cryptocurrencies, such as Ethereum, also experienced temporary price drops. However, international crypto exchanges that are not directly connected to the Indian market did not show comparable price fluctuations.

Zebpay already assumed regulations instead of a ban in November

However, one of the senior executives of Zebpay, one of the largest crypto exchanges in India, said back in November that he did not believe cryptocurrencies would be banned but that the government would just enforce strict regulation. “I believe we will have some kind of coherent regulation but on the tougher side,” said Avinash Shekhar, co-CEO of Zebpay.

Although a parliamentary bulletin indicates that they are working on a law that would ban most private cryptocurrencies and create a framework for creating an official digital currency, Shekhar tells CNBC that the Indian government’s attitude towards cryptocurrencies has changed in recent months. “There have been a lot of positive vibes from the government. We met with the parliamentary finance committee about a fortnight ago. The message […] we are getting from the government is that they are looking at some kind of regulation – strict regulation, but not a complete ban,” said Zebpay’s co-CEO.

How the crypto industry in India will be controlled

It has since emerged that Shekhar was right in his assumption of regulation rather than prohibition. As Indian news service NDTV reports, the government’s proposed bill envisages regulating private cryptocurrencies instead of banning them. This information is said to have emerged from a cabinet note circulated by the government itself.

According to the note, five issues will be addressed in the draft. First, it reveals that cryptocurrencies will not be recognised as legal currency in India but will be treated as crypto-assets. These crypto-assets will be traded through already existing crypto exchange platforms controlled by the Securities and Exchange Board of India (SEBI). Those who already own cryptocurrencies will have to register them on a cut-off date and submit them to the crypto exchange platforms. 

Further, the virtual currency proposed by the Reserve Bank of India is not to be included in the new crypto legislation. However, the central bank is to be responsible for clearing issues related to cryptocurrencies. 

Violations of the exchange regulations can be punished with imprisonment and a fine of up to 20 million rupees. In addition, the law on the prevention of money laundering is to be adapted to deter those who might misuse the assets for terrorist activities.

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