In 2018, cryptocurrency trading in India experienced it’s rise and falls; most of which were as a result of the Reserve Bank of India’s (RBI) ban on cryptocurrency exchange by banks. in their defense, the RBI stated that they were concerned about the financial security of consumers, the integrity of the market, money laundering, crypto scams and the many other “susceptible” parts of the cryptocurrency ecosystem.
How it all started
It is important to state that prior to the April ban, crypto exchanges in India were were neither illegal or “legal”. In November 2016; after the removal of the 500 and 1000 rupee notes from circulation (calculated to be about 86% of the currency), virtual currencies seemed to be more trustworthy than cash. The removal of these currency notes by the RBI saw an immediate 7% fall in stocks as people fought their way in unending queues, to exchange their cash. In 2017, it was estimated that about 2500 Indians made bitcoin investments daily and this saw an unprecedented increase in VC exchange. The RBI showed its concerns alongside the ministry of finance and the government set up a committee to study the blockchain and cryptocurrency trend.
One of RBI’s most salient worry is the fact that cryptocurrency doesn’t have a centralized body that can regulate the exchange of virtual currencies and in the absence of that and any proper form of government regulations, the crypto market is very susceptible to scammers and hackers. Arun Jaitley, the financial minister, during the budget presentation in 2018, stated that bitcoin was in no way recognized as legal tender in India, till the government could develop a way to put its stamp on the digital currency. He also stated that there would be steps taken to ensure crypto payments were penalized. Certain officials from the RBI and the ministry of finance have also reiterated the fact that the government is however interested in the blockchain system and is conducting extensive research in order to create a centrally regulated form of digital currency exchange.
Cryptocurrency exchange in India after the ban
After the ban on cryptocurrency exchange by banks was announced by the RBI and the financial minister’s statement during the budget presentation, the prices of bitcoin fell well below $7000 and stayed so for about 2 months. Cryptocurrency investors and enthusiasts stood on seemingly shaky grounds as media houses seemed to say that the finance minister had pronounced bitcoin and other forms of cryptocurrency exchange as illegal. The Blockchain and Cryptocurrency Committee (BACC) of Internet and Mobile Association of India (IAMAI) took this up and have began to create awareness as to the benefits of cryptocurrency investments and the government’s stand on cryptocurrency exchange in the country.
It is important to state that the RBI did not place a ban on all forms of cryptocurrency exchange in india but rather asked that the banking institutions stop all forms of cryptocurrency exchange pending when the government creates a regualrized standard for cryptocurrency exchange in India.
Peer to peer exchanges have been on the rise since the ban by the RBI and as of today, well over 600,000 Indians use bitcoin and prior to the ban, over 400 merchants had adopted the trend of payments being made with cryptocurrencies. The committee setup by the government to study cryptocurrency and create a legal framework for the exchange of cryptocurrencies have stated that they would look into the RBI act of 1934 as a guide.
The future of cryptocurrency exchange in India
Several individuals bodies have filed suits against the RBI however, the future of cryptocurrency exchange globally is quite promising. And like other countries, putting laws to regularise the exchange of cryptocurrency seems like the best bet yet. Even after the ban on cryptocurrency exchange in India, there has been a gradual rise in the amount of bitcoin.
The ministry of finance has also stated that they have began studies on blockchain and look forward to working with it as it has a centralized system and serves as the underlying system for many cryptocurrencies. They also stated that new advancements could take time to study and improve upon so there would be no hurry to quickly create just any system till they are sure of its safety and that of all users. For cryptocurrency investors in India, you can still trade your currencies with domestic exchange bodies but will India embrace cryptocurrency in the future? I think there can only be one answer on your mind and I agree.