Private cryptocurrencies may have gone the way of digital-payment services like bitcoin and ethereum, with Indian Finance Minister Arun Jaitley announcing the government’s ban on cryptocurrency trading. But the government’s crackdown on digital transactions is doing little to clear up confusion about what exactly is and isn’t allowed.
Bitcoin and other digital currencies “have no legal effect,” Jaitley said. While cryptocurrency is a form of currency that wasn’t permitted by the Indian Constitution, Jaitley said that it has managed to gain a certain “momentum” which the government is concerned about. “While we consider this a matter of convenience and legal fit for digital assets, we have also provided the necessary safeguards for investors and consumers,” he said.
Last week, PNB, the Indian state-owned bank, closed accounts associated with NDFs, one of the largest currency trading platforms, after discovering that some accounts had been used to launder money. India’s stock exchanges, including the Indian Depository Companies, are also promising to block all crypto-related trading.
In July, the Reserve Bank of India ordered banks to declare trading on digital platforms as money laundering, and allowed only online registrants to access them. The government further moved to reduce security, while banks and stock exchanges were required to make cryptocurrency trading systems compatible with RBI requirements.
This latest policy may have some similarities to efforts on a state level, where North Dakota banned cryptocurrency trading in 2017, but left open the possibility of a people-powered digital currency through “the use of public call derivatives.” South Dakota, which began investigating the potential for cryptocurrency-based businesses back in September, has also restricted purchases.
Cryptocurrencies may pose risks to finance and government, but the government is still trying to understand the technology’s practical uses. Data for the Indian government seems to suggest there are large investment flows in cryptocurrency accounts that could affect the national economy.
As noted, around 30 percent of cryptocurrency accounts in India are held by individuals. In September, amid news of a government ban on cryptocurrency trading, the central bank advised people not to hoard the technology. “Creditors don’t want to take full-out losses on accounts where the value of assets are assumed to have been in excess of the liability amount,” it said. “Emptying such accounts will help lenders to collect the full amount owed on account of assets held.”
Since that time, most businesses in India are still yet to take serious note of cryptocurrency, with many major exchanges closed in Mumbai, Chennai, and Bangalore. Only in this week, have cryptocurrency exchanges revived.