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Government of India working on law to ban crypto trading

Aug 11, 2020

Despite India’s 1.3-billion population, digital asset businesses are a $80 billion remittance industry, and the fact that India has been identified as the land of opportunity for cryptocurrency and the global payments industry, the country has largely been a minor player on the cryptocurrency industry’s global stage. While neighbor countries to the east and west have made themselves international hubs for the cryptocurrency industry, India has, arguably, been left behind.

In the beginning of 2020 the Reserve Bank of India (RBI), the country’s central banking institution, clarified to the country’s supreme court that although banks in India are forbidden from having working relationships with cryptocurrency platforms, cryptocurrency itself is not illegal or otherwise banned in India.

After months of delay in hearing the case, in the beginning of March supreme court ruled in favor of the digital asset businesses. In decision the court dismissed the order of RBI that banned all the commercial banks under its purview from offering banking services to crypto-related businesses.

Currently government of India is preparing to ban digital currencies trade again by introducing a new law. The government has been consulting with the law ministry, ministry of information and technology, and the RBI to draft a framework to ban cryptocurrency trading in India.

Government official has told that there was a view in the government that banning cryptocurrency trade through a law would be more binding, and it will clearly define the illegality of the trade. The government have forwarded a note to related ministries for inter-ministerial discussions. After the inter-ministry consultation, the note will be sent for cabinet approval. The government has been holding consultations with law ministry, ministry of information and technology and the RBI for a framework of a law that will formally end trading in cryptocurrency in India. “Once Parliament resumes for the session, we are hoping to get it ratified," said government official.

Previously RBI hostility forced many well-established local crypto exchanges to either shutter their services or move their base overseas. In the middle of the landmark court judgment, the trading volume of the Indian crypto skyrocketed. Many oversee crypto companies are also entering the Indian market lately.

Notably, there is no supportive voice from the Indian lawmakers towards Bitcoin or other digital currencies. However, many were hailed for their contribution to the blockchain technology.

Millions of dollars worth of business in cryptocurrency is being done every week, with the lockdown pushing up the volumes. Industry professionals said that the government is losing out on precious revenue by not coming up with a regulatory mechanism. Additionally, a ban will bring increased untraceable transactions, increased risk of money laundering, benefits for foreign companies that will receive money from Indian investors, loss of tax revenues.

Given India’s diversity, huge population, competence towards new technology, there is good reason to believe that India has huge potential as a hotspot for the crypto industry.

Considering India’s government intentions to measure and ban cryptocurrency trading in India, our team would like to offer similar jurisdictions and set up a company focused on providing services of the exchange of virtual currency in Estonia or Switzerland.

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