BQ Exclusive: India May Consider Regulation Of Cryptocurrencies

India plans to regulate cryptocurrencies, and is awaiting a Supreme Court judgment governing them before taking a final decision.

The government is weighing whether the virtual currencies can be regulated by the Reserve Bank of India, according to people aware of the development. A framework for the regulation will be decided upon after deliberations with the central bank.

The regulation of cryptocurrencies, however, may not permit their usage in payments systems, the people cited earlier said, adding that they won’t be allowed as a legal tender even then. The digital currencies may be notified or approved by the RBI, and cryptocurrency exchanges could be recognised and regulated by the Securities and Exchange Board of India. The discussions, however, are at a nascent stage.

The Supreme Court will on April 27 hear the case pertaining to regulation of and ban on bitcoin and other cryptocurrencies in India. That would guide the government’s future course of action, the people cited earlier said.

In 2017, two parties had filed separate writ petitions in the Supreme Court—one seeking a ban on virtual currencies by declaring them illegal, and the other to regulate bitcoins and other cryptocurrencies. The apex court, in late 2017, had decided to jointly hear the petitions.

This comes after a government panel had recommended last year a ban on cryptocurrencies and proposed stringent punishment for those involved in its trade. The Supreme Court, on March 4 this year, ordered against the curbs put in place by RBI that effectively outlawed virtual currencies.

The apex court had said that in the absence of any legislative proscription, the business of dealing in these currencies should be treated as a legitimate trade that’s protected by the fundamental right to carry on any occupation, trade or business under Article 19(1)(g) of the Constitution of India.

In 2018, RBI had banned banks from offering any services to platforms that facilitated trading in cryptocurrencies. This directive by the central bank was challenged by cryptocurrency exchanges in the Supreme Court.

Even if the government accepts most of recommendations of the panel led by former Economic Affairs Secretary Subhash Chandra Garg, the draft bill gives powers to the central government to exempt some cryptocurrencies, and activities such as mining, holding, selling, dealing in or use of cryptocurrency, among others, the second official cited earlier said.

Also Read: Decoding The Supreme Court’s Cryptocurrency Judgment

The change in bureaucracy at the top level, from the time when an outright ban on cryptocurrencies was considered, has also led to a shift from the previous stance, the second official said.

Also Read: India’s Crypto Geeks Live On To Fight Another Day

A complete crypto ban would lead to underground trading in cryptocurrencies, and would be difficult to implement too, the second official said. The regulation of the asset, however, would be considered, keeping a check that these virtual currencies are not used for illegitimate activities—something that was deliberated by the Garg-led panel too.