India reconsiders banning cryptocurrencies

An anonymous government official has revealed that a “note” seeking a ban on crypto trades has been sent for inter-ministerial discussions

Image of the Supreme Court Building in Calcutta, India.
Earlier this year, the Supreme Court of India withdrew the ban on banks providing services to cryptocurrency businesses

The status of cryptocurrency remains a hot topic in India, with reports that a “note” asking to “ban trade in cryptocurrency” has been forwarded to authorities for discussion.

A government official, who has chosen to go anonymous, explained that the national government has been discussing the matter with the Ministry of Information and Technology, the Ministry of Law and the Reserve Bank of India (RBI). Their discussions are geared towards developing a framework for a law that will “formally end trading in cryptocurrency in India”.

“We have forwarded a note to related ministries for inter-ministerial discussions…we are working on it. After inter-ministerial consultations, it (the note) would be presented to the cabinet for approval. Once Parliament resumes for the session, we are hoping to get it ratified.”

The official revealed that the government hoped the ban would clearly define the illegality of trading in cryptocurrencies.

India has had a mixed reaction to the adoption of cryptocurrencies and the media has picked up on multiple instances that indicate the government’s plans to clamp down on the industry entirely. In June, the Economic Times released a report detailing how the country is planning to introduce a law to ban cryptocurrencies, as per a note sent by the Ministry of Finance for an inter-ministerial consultation.

However, executives from crypto exchanges believe that a total ban on cryptocurrencies is highly unlikely, given the growth of the industry since the bill was submitted to the Ministry of Finance in 2019.

Subhash Chandra Garg, the former Secretary of the Department of Economic Affairs (DEA), was head of the inter-ministerial committee that drafted the bill. While Garg has now retired from government, he recently suggested that cryptocurrencies can be regulated as commodities.

Furthermore, the DEA’s reply to a Right to Information (RTI) application suggests that the government remains unsatisfied with the bill’s present state. Attorney Mohammed Danish, a lawyer at the blockchain research platform, Crypto Kanoon, explained that the government is wary of passing a law banning crypto as it can be challenged by crypto businesses, traders and enthusiasts.

After the Supreme Court of India revoked the circular from the RBI on banning banks from offering financial services to businesses in the crypto industry, crypto exchanges based in the country have witnessed over 10 times as much trading volume and a dramatic increase in the number of signups. This indicates that there is a growing interest in the country for the integration of cryptocurrency.

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