Cryptocurrency: India’s Dilemma Versus Japan’s Partisanship

Everyone is aware about finance minister Arun Jately’s vociferous and pandemonium budget speech, which could be another reason of uproar in the national press and bitcoins plummeting price from $19,343 to $8,800 few days back…  

Although Jately’s word not shown the ban on cryptocurrency completely but the tone of his up beating speech was clear that government was not in favour of cryptocurrencies in India. He precisely told that government was not favouring cryptocurrencies and considering them as illegal tender. He reiterated about the previous warnings issued by RBI and the Ministry of Finance and emphasised on the major steps to be taken to eliminate the use of cryptocurrencies in financing illegitimate activities or as part of the payment system and stead fasting his views on block chain technology, “the Government will explore use of Blockchain technology proactively for ushering in digital economy.”

Ajeet Khurana head of the Blockchain and Cryptocurrency Committee (BACC) of Internet and Mobile Association of India (IAMAI) is one among the many people in India working towards spreading cognizance on cryptocurrency. Following the finance minister’s comments, Khurana revealed that he was happy that cryptocurrency at least found a mention in the country’s national budget. “I recognized that it was a step in the right direction. Having the finance minister say that cryptocurrency isn’t legal tender is perfectly logical –– every nation barring Japan has taken this stance. It doesn’t mean crypto trading is illegal, but comes with its own risks like any other investment asset in the market.”

He further, added on the comment of Jately about its illegitimate payment system, which Khurana thinks that the payments system includes a lot of things like the settlement mechanism, and the banking system. In recent times, digital wallets and other payment mechanisms have been added to the entire scenario.

What the Finance Minister might be saying is that cryptocurrency is not considered to be a part of these payment systems. Similarly, gold is not part of a payment system, but people still barter assets like gold for goods, as long as both parties record the transaction. It is an asset barter transaction.

There is a little subjectivity on the matter. Can an individual swap cryptocurrency for another cryptocurrency?

We have to wait for clarification on what the Finance Minister meant when he mentioned payment system. There has been no indication by the government that it is banning exchanges. Neither does it stop people from holding a cryptocurrency. It is just saying that the government doesn’t recognise cryptocurrency as money, which no country in the world does except Japan. Banks who have taken the action of not providing accounts or services to these exchanges have done it on their own will.  They haven’t been instructed by the RBI to do so, and the Central Bank hasn’t issued any circular in this regard. Banks have the right to choose their customers. My take on the banks that have pulled out is that they haven’t thought of the future, and this is completely a knee-jerk reaction.

Despite this, the interest towards cryptocurrencies remains, and the fresh number of account opening applications continue to grow.

“In spite of Bitcoin’s “Sell-Off” the planet of cryptocurrency keeps attracting the investors weather in India or in any big nation. It is quite fathomable that various challenges will be faced by any regulatory authority and the government to deploy this system. I believe the only worry for any regulator will be to keep a track of where the money is going and to make sure it is not used for any kind of illicit activity. If not a proper policy framework, we can at least expect the government to release a policy framework around cryptocurrencies this year like Japan is taking steps in favour of setting up a government-registered cryptocurrency exchanges said Sidharth Sogani from Block Next Solutions LLP…

Regards,

Heena Gupta

(Content writer, Block Next Solutions)

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