Cryptocurrencies In India: A Battle With Government Diktats, RBI Warnings
RBI has issued atleast three warnings to cryptocurrency traders Arun Jaitley often asserted that digital currencies are not legal tender RBI is exploring the possibility of starting its own digital currency
As less than a month is left before the RBI's (Reserve Bank of India) three-month deadline given to banks for snapping their ties with cryptocurrency firms expires, the cryptocurrency traders and exchanges are in utter trepidation and disbelief. Some, however, are somewhat hopeful that after a RBI clampdown comes into force, the legal status (or the lack of it) will be somewhat clear. Lately, the cryptocurrency traders and investors have battled quite a few warnings and diktats issued by ministry of finance, Reserve Bank of India and Union Finance Minister Arun Jaitley.
It was ironical that on one side, the government hasn't legalized it, while at the same time, the income tax (I-T) department didn't leave any stone unturned to tax the gains accrued on bitcoin trading.
In early February this year, income tax department even issued a few lakh notices to those who put their investments in bitcoins. The taxman had realised that bitcoin merchants and traders didn't pay advance tax on the benefits which they have accrued.
Often the government authorities have stated that cryptocurrency is not a legal tender and it promotes ponzi schemes, while at the same time denying any aversion to blockchain technology.
Even during the Budget speech, Union finance minister Arun Jaitley said that the government will look at the utilisation of Blockchain.
Even the central bank has set up an inter-departmental committee to explore feasibility and desirability of starting own digital currency in future.
"If the government were totally against the idea of cryptocurrency, the central bank wouldn't have ordered a committee to check the feasibility of country's own digital coin," said Niranjan Patil, digital currency (hedging) strategist based in Bengaluru.
On three occasions, the central bank has cautioned the users, traders and holders of digital currencies. The first warning was sent in December 2013, the second in February 2017 while the last one in December 2017. "Users, holders and traders of Virtual Currencies (VCs) including Bitcoins are cautioned regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with such VCs," said the RBI release in December 2017.
Some, however, fear that outright ban on cryptocurrency would foster the creation of black market
"Demonetisation was done, at least partially for creating a more digital economy. Cryptocurrencies are tailor-made for the digital ecosystem and given their popularity, an outright ban is just going to create a parallel crypto black economy," says Awanish Rajan, CEO of IDAP, an upcoming crypto derivatives exchange currently doing the ICO for its token.
It is worth noting that cryptocurrency ban by the Reserve Bank of India (RBI) was challenged in the Supreme Court, which is scheduled to hear the matter on July 20.
The Indian exchanges who believed in blockchain technology have started exploring other geographies to follow the strategy of wait and watch.
For instance, BuyUcoin launched its own token called the BuyUcoin Token (BUC) which will be used on global decentralized exchange in Singapore.
