India Mulls Banning ‘Use’ Of Cryptoassets

Colin Muller

The Indian government is considering “[banning] use of private crypto currencies” in the country, the Indian Press Information Bureau revealed yesterday in a brief notice. The mention was somewhat cursory and only one of a series of other roughly illustrated Bureau announcements.

The full text reads as follows:

The [Financial Stability and Development Council] also deliberated on the issues and challenges of Crypto Assets/Currency and was briefed about the deliberations in the High-level Committee chaired by the Secretary (Economic Affairs) to devise an appropriate legal framework to ban use of private crypto currencies in India and encouraging the use of Distributed Ledger Technology, as announced in the Budget 2018-19.

Indian Press Information Bureau

Regulatory Uncertainty

This latest missive comes after the country’s supreme court upheld a Reserve Bank of India (RBI) decision, in April, to prohibit all RBI-regulated entities from crypto-fiat transactions; namely such entities “shall not deal in [virtual currencies] or provide services for facilitating any person or entity in dealing with or settling VCs.”

That ruling caused considerable turmoil among India's nascent cryptoasset-oriented businesses, and a mass appeal was filed to the supreme court in response. Only days ago, India's supreme court requested clarity on the government's position regarding cryptoassets, as CryptoGlobe reported over the weekend.

Yesterday's release, however, seems to offer little clarity, with the specific meaning of “use of” unclear. No details are given about further prohibitions against cryptoassets, nor about any "appropriate legal framework" that could follow.

The 2018-19 budget proposal specified in the release, also provides little further elaboration on the subject, saying “The Government does not consider crypto-currencies 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,” adding “The Government will explore use of blockchain technology proactively for ushering in digital economy.”

The RBI has of late been considering its own rupee-backed cryptoasset, as CryptoGlobe reported on earlier this year. Such a move would perhaps speak to the meaning of yesterday's statement signaling a policy to "[encourage] the use of Distributed Ledger Technology."

Carrot-and-stick

India, like other nations and entities, seems to be mulling the carrot-and-stick approach to cryptoassets: considering or enacting strict rules regarding the use and purchase of open-source or public cryptoassets, while simultaneously lauding the technological potential that underpins them. Zambia  recently took a similar position, denying the possibility of cryptoassets as legal tender and warning away citizens from interacting with cryptos, while simultaneously kneeling at the altar of innovation. China has followed a similar arc, as has Russia.