Despite the headlines proclaiming that yet another Asian nation has outright banned cryptocurrencies, India has in fact not banned cryptocurrencies. Nevertheless the most recent Indian budget doesn't look to kindly on cryptocurrencies. The news comes during bitcoins worst performing month in over a year with prices slipping below the $10,000 support.
“The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system,”
Despite not banning cryptocurrencies India’s finance minister Arun Jaitley said in no uncertain terms that cryptocurrencies are not legal tender. Which may close the door on hopes of using bitcoin as a payment network.
India’s approach to cryptocurrency regulation has been hit and miss over the last year with contradicting messages. The central bank has issued warnings continuously over 2017 as the market boomed. The Reserve Bank of India (RBI) said in November that it supported the ‘underlying technology’ of bitcoin but would not allow its use as a form of payment.
Arun Jaitley didn’t delve into any details on how they planned to crackdown on the use of cryptocurrencies for illicit purposes. Private companies such as https://www.elliptic.co/ that identify illicit activity and provide law enforcement with tools to track this activity may hold the answer for governments.
Despite the negative stance taken by the RBI the premiums in India versus USD markets have remained high although volatile. Perhaps a symptom of a less liquid market however some believe it to be a result of India’s strict capital control system that makes it hard for Indians to buy FX to protect themselves against a devaluing INR.