Indian government officials appear to be dragging their feet when it comes to drafting new cryptocurrency regulations for the country. An inter-ministerial committee has been formed and has met several times, ostensibly to lift the existing quasi-ban within India. The “ban” is the result of actions taken in April of 2018 by the Reserve Bank of India (RBI) prohibiting any bank that it regulates from dealing in any way whatsoever to provide service to a “Virtual Currency” company of any kind. The Supreme Court, however, may soon step into the fray and remove the ban on its own.
The new rule went into effect on July 25, 2018, even though the RBI admitted that it could have done more due diligence before issuing its orders. The rules were specific: “In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs.”
Suddenly exchanges could not settle in fiat with clients, unless through overseas accounts. Zebpay, one of three domestic crypto exchanges, had to shut its doors. Various groups filed petitions and lawsuits, while putting pressure on public officials to institute new laws. Several crypto related court cases are now presently pending with the Supreme Court, and the word on the street is that the Court has given the government four weeks to finalize regulations or it will rule on its pending cases. Internal sources contend that the Court will reverse the current ban imposed by the RBI.
We reported in January that the inter-ministerial committee was gradually forming a more favorable consensus about cryptocurrencies. According to one insider acquainted with committee discussions: “We have already had two meetings. There is a general consensus that cryptocurrency cannot be dismissed as completely illegal. It needs to be legalised with strong riders. Deliberations are on. We will have more clarity soon.”
There have been no further pronouncements from this inter-ministerial group, other than that they take the subject matter very seriously, want to do the right thing for the country, but believe that they must proceed with “utmost caution”. They have published no timetables or submitted any preliminary regulations for review and feedback.
The Supreme Court, however, is hearing cases where it is posited that the RBI acted without constitutional support, and its actions are causing irreparable harm to existing businesses. The Court is apparently losing its patience, the reason for the mandate to act or else the Court will independently rule. It is doubtful whether the government committee could produce new rules within the four-week period given by the Court.
Crypto enthusiasts in India, however, are once again holding their collective breath to see if current actions to lift the cryptocurrency ban and permit regulated exchange trading again will be successful. The clock is ticking.