Several departments of the Indian government had recently recommended placing a complete ban on the sale, purchase, and use of cryptocurrencies.
India’s Central Board of Indirect Taxes and Customs (CBIC), the Central Board of Direct Taxes (CBDT), the Investor Education and Protection Fund Authority (IEPFA), and the Department of Economic Affairs (DEA) had all reportedly suggested last month that cryptocurrency transactions be prohibited. The main reason for proposing a ban on cryptos was concern over their use to finance illicit activities such as money laundering and terrorism.
Banning Cryptocurrencies, Ensuring Investor Protection
According to the Economic Times of India (ET), various departments of India’s government suggested that “an immediate blanket ban” be enforced under the nation’s Prevention of Money Laundering Act 2002 (PMLA).
As noted by the ET, the proposed ban would aim to ensure investor protection and that India’s Department of Revenue “may immediately issue a notification under PMLA to completely ban” the use of cryptocurrencies. In addition to prohibiting individual users from transacting in cryptos, “all [Indian digital asset] exchanges should be immediately shut down,” India’s government departments recommended.
Not Possible To Ban Cryptos Due To Their Decentralized Nature
However, certain members of India’s crypto and IT industry believe that it may not be possible to ban or restrict the use of cryptocurrencies due to their decentralized nature. Moreover, a ban on blockchain-based digital assets may not be in India’s best interests.
According to the founder of an Indian crypto exchange:
None of the advanced economies in the world [except] China have banned [cryptocurrencies,] as these countries have [realized] that banning the exchanges may result in proliferation of these currencies through illegitimate sources such as [the] dark web and [various other] underground marketplaces.
“How Can You Ban Something You Can’t Control?”
The exchange owner further noted:
How can the government ban something it has no control over in the first place?
Meanwhile, Nischal Shetty, the CEO of digital asset exchange WazirX, said that “the core idea is that these coins” can be traded in a peer-to-peer (P2P) manner. Because cryptocurrency transactions can be completed without requiring intermediaries, Shetty pointed out that “no government [currently] has the technology to monitor them.”
He added that one of the only ways to accurately track crypto transactions is when users sell or purchase digital assets through a centralized and regulated exchange. That’s because these platforms require users to complete know-your-customer (KYC) / anti-money laundering (AML) checks – which means users must submit their government-issued IDs in order to prove their identity.