The Government of India has been providing an incoherent stance on cryptocurrency regulation and legalization for years now, which has left most investors dizzy. Since the country’s central bank banned digital asset usage completely in 2018, companies have been moving out of India to set up shop elsewhere. Meanwhile, even as the ban was later revoked, the Reserve Bank of India has been consistently calling for one, citing issues of consumer safety and market integrity.
On the other hand, the government is yet to provide its official stance on the legality of the asset class, even after repeated calls across the industry to do. However, this might soon change with judicial pressure now acting as momentum for the government to make up its mind.
During a court hearing related to a Bitcoin scam earlier today, the Supreme Court of India asked the government to “make their stand clear” on whether cryptocurrencies are illegal or not, according to local media. While the government representative replied that this will be done in due time, a long-awaited bill regarding cryptocurrency regulation is yet to make it to the parliament.
The GainBitcoin scam in question involved a multi-level marketing scheme that promised 10% monthly returns on bitcoin investments, evaluated to have raked in around $2.65 billion.
While such crimes might play into the RBI’s argument of rampant crime within the digital asset industry, experts have earlier claimed that regulation would in fact put a curb to such illegal activities.
Regardless of this, the Supreme Court’s insistence came shortly after India imposed a 30% tax on virtual asset income last month, which includes any gains made from cryptocurrencies or NFTs. Even as they were dejected by the high tax rate, many investors in the country expected this move to be followed by the legalization of digital asset usage.
However, any such hope was soon crushed after Finance Minister Nirmala Sitharaman highlighted that taxation of the asset class does not mean that it has been legalized, even as many questioned how something illegal can be taxed. At the same time, the central bank has continued to express its negative outlook on the industry and has instead been favoring a blanket ban similar to China’s.
While the two sides continue to fight out the status of cryptocurrencies in India, investors have been left in limbo, as banks in the country continue to await official directions. Local reports have suggested that banks are hesitant to provide support to crypto transactions even though consumer demand has been on the rise. Due to this, exchanges have to rely heavily on digital wallets to carry out trade, which often accompanies heftier charges.
“We will wait for regulatory clarity and then act accordingly, even on discussions with these exchanges”, one bank exec noted in the report, while another claimed that the exchanges were yet to step up security measures such as KYC in order to be formally included in the financial sector.