India, the world’s largest democracy, has extended its crackdown on the cryptocurrency industry, according to new reports and insiders within the country. India has been pursuing stringent regulations against the blockchain industry all year, but within the past few months this effort has intensified. The blockchain industry now can best be described as “crumbling” — and the regulatory ambiguity in the country seems set to continue this decline, putting India as effectively one of the least crypto-friendly countries in the world.
Just today, the Hindu BusinessLine reported that the president of Indian nonprofit trade organization, NASSCOM, came out publicly to denounce cryptocurrencies, calling them “illegal.” Debjani Ghosh did not elaborate on whether or not it was right that cryptocurrencies were illegal, she merely reiterated the current legal situation. However, she did place blame on startups in the digital industry, who like to “experiment” and “do not know right from wrong.” She, like many other industry giants within India, expect that the blockchain space will get more regulated, not less. This poses a severe problem for the cryptocurrency space: we just don’t know how far this will go.
Ghosh is the president of NASSCOM, a nonprofit trade association with some 2,000 member companies. They are mainly responsible for Indian IT and business process outsourcing.
The latest victim in this crackdown is a company called Unocoin which was responsible for setting up India’s first Bitcoin ATMs in the city of Bangalore. Unocoin also runs their own cryptocurrency exchange. Unocoin’s co-founder and chief technology officer was subsequently arrested this past Tuesday while tending to the ATM, according to the report. The arrest entailed the seizure of the ATM, two laptops, passports, and bank information.
Unocoin, however, is one of the few exchanges that survived a ban from the Reserve Bank of India, the country’s central banking authority.
Unocoin’s other co-founder came out with a statement following the arrest saying:
“The [Finance] Minister’s statement was clear: cryptocurrencies are not legal tender in India. He did not say ‘illegal tender’. There’s a huge difference. It means you bear the risk of your investment and there’s no regulation for the industry.”
India Not Open for Cryptocurrency-Related Business
Ever since July, India has been increasingly hostile to the cryptocurrency space. It was then that the Reserve Bank of India (RBI) banned all the country’s banks from doing business with anything having to do with digital assets. Risks to financial stability and investments were cited as the reason.
The ban has been upheld by the Indian courts numerous time now, but cryptocurrencies have not been formally banned. Only banking activities with cryptocurrencies are currently banned. This has created a regulatory ambiguity that has so many people in the blockchain industry scratching their ends.
One of the victim’s of this crackdown was Zebpay, formally India’s largest cryptocurrency exchange, which permanently shut its doors last month. Zebpay is one of the numerous exchanges which have been forced to cease operations.
In an effort to resolve this legal ambiguity, the Indian Supreme Court has asked the Centre to give its official view on cryptocurrencies within two weeks. The court was pressured by a large number of petitions received in the past few months. Most of the petitions have been about challenging the ban enacted by the RBI. Currently, there is no formal ban on the trade between cryptocurrencies, but some of the more prominent figures within the Indian cryptocurrency community have been hit with unfair scrutiny.
Nakul Dewan, a counsel for nine cryptocurrency exchanges, highlighted the frustration many were feeling in the country in a public comment. Frankly, the regulatory ambiguity might set the country back enough where it may lose the edge it globally once had in the blockchain space. Dewan said that, although cryptocurrencies were banned in nine countries worldwide, most jurisdictions in China, Europe, and especially the United States still allow it. He put it frankly, “we have got employees. There are jobs… “ and that they can’t just let this fester. The government “must give finality on this issue.”
The Reserve Bank of India has been putting out notices on the cryptocurrency space for years now. However, their current crippling policy has shuttered a once-booming domestic cryptocurrency space. The central bank even went as far as implying that the original ban was not given much thought, coming into effect “arbitrarily.” Inundated with a slew of petitions, however, it seems that the Supreme Court of India will soon have to produce a consistent legal opinion. It seems clear though that, as of now, India is definitely not open for crypto-business.