In the past few years, India has been battling issues affecting the use of cryptocurrency in the country. As a result of these issues, a ban was placed on crypto which negatively affected the growth of cryptocurrency in India and the ability to buy bitcoin in India.
The ban by the government was based on the allegations that cryptocurrency is connected to terrorism financing and crimes associated with the fraud. These issues put the Indian government in doubt, whether banning or regulating cryptocurrency in the country is the solution.
Despite the ban on crypto in the country, Bitcoin, Litecoin, Ripple, Etherum, and other cryptocurrencies have been growing at a rapid rate and people see them as a better option to legal tenders and the exchange is mostly online.
The ban of cryptocurrency in India
In the early days of Bitcoin and other cryptocurrencies, several financial frauds and money laundering were perpetrated as a result of demonetization.
In 2018, the former minister of India’s corporate affairs commission Arun Jaitley while delivering his speech on budget emphasized that the Indian government will ensure that cryptocurrency remains banned in India. It is not considered a legal tender and using it as a system of payment is illegal.
Due to this, the Reserve bank of India (RBI) sent out a circular in April 2018 banning organizations from rendering financial services to persons involved in cryptocurrencies.
After the announcement, the adoption of bitcoin in India suffered a dramatic fall. This dramatic fall in adoption provoked a lawsuit against the Indian government.
The Court gave a verdict that bothers around the fact that the reserve bank of India failed to show any evidence to prove that any of its entities suffered any damage due to the use of bitcoin in India.
In March 2020, the Court then made a verdict overturning the government ban by admitting that the RBI has no verifiable evidence showing that cryptocurrencies have affected the banking sector in any negative way.
Despite the ban on crypto trading being lifted and Indians can now freely buy bitcoin India, crypto exchanges are still not recognized by the Indian government as the government has made it hard for exchanges to operate. There is still no clarity concerning the government’s position of cryptocurrencies in India as the Indian government has not made endorsements or completed regulations as regards cryptocurrencies.
Although, after the Supreme Court verdict, there are recent reports of fraudulent activities, the report of a case that took place on the cryptocurrency platform which involves a company known as Pluto exchange. Pluto exchange was discovered to have duped over 40 investors and the fraud involved is estimated to be more than $270,000 and the director was said to have received over $6 million.
Anirudh Rastogi a founder and managing associate at Ikigai law firm, the law firm that represented Pluto crypto exchange in the lawsuit, in one of his statements said that there was an overwhelming fear that the government might still look for ways to introduce laws against cryptocurrencies.
People are closely watching the reserve bank of India to see if it will be making new laws against digital currencies in 2021.
Benefits of Bitcoin to the Indian government in 2021
If the Indian government completely gives a positive note on cryptocurrency in the country, lots of cryptocurrency exchanges will enter the Indian market without the fear of a ban, and this will, in turn, boost the country’s economy.
The population of India is over 1 billion and if this entire population is allowed to sell and buy Bitcoin in India, the cryptocurrency world would experience growth, different crypto start-ups will evolve and this will help create jobs and wealth within the country.
During the Covid-19 pandemic lockdown, reports show that cryptocurrency was used as a form of asset protection against devaluation due to the uncertainties that come with the covid-19 Pandemic. A lot of people had to liquidate their fiat assets and buy Bitcoin in India. As a result of this decision, many people were able to avoid going bankrupt as cryptocurrency helped grow the value of their portfolio.
For years reports related to money laundering and financing of terrorism have been the major issues surrounding cryptocurrencies exchange, But with over 1.5 million Indians involving in digital assets, this is the right time for the government to see the potentials that cryptocurrencies will add to its economy.
The government can make proper laws to regulate cryptocurrency, which provides users protection and usage concerning money laundering and financing terrorism.
To avoid money laundering and financial terrorism, the reserve bank of India can probably partner with financial institutions and cryptocurrency exchanges to regulate and check fraudulent transactions.
The central banks of several countries have begun the process of developing their cryptocurrencies called central bank digital currency (CBDC).
Some countries have even started testing out their CBDC and at least 3 nations are set to replace their local currencies with their CBDC by 2030. And so, to avoid being left behind, the Indian government has to accept that cryptocurrency and blockchain technology is here to stay.
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