The Indian government is currently preparing a bill on the regulation of cryptocurrency. “The bill has been drafted and consultation has been started with the concerned agency,” reported the Navbharat Times last week. The news outlet explained that regulators were divided on whether to ban or to allow the use of cryptocurrencies, like bitcoin.
“The finance ministry is in favor of regulating [cryptocurrency],” according to sources. The Income Tax Department, on the other hand, is not in favor regulation because according to them
“the regulation of virtual currency is almost impossible and it promotes the use of black money”.
The Reserve Bank of India (RBI), India’s central bank, is not in favor of banning cryptocurrencies but sources are saying, “The current form of the bill proposes to ban virtual currency businesses”. But exemptions might be in place for “issuing crypto tokens in exchange for assets.”
The Indian Special Investigation Team (SIT), on the other hand, wants to “ban the use of bitcoins” after they discovered at least four cases where bitcoin was used to pay for drugs. The SIT is made up of officials from the Narcotics Control Bureau (NCB), the Central Bureau of Investigation, the Enforcement Directorate (ED) and the Income Tax Department.
The SIT has previously requested the NCB, ED and the Income Tax Department “to take adequate measures to prevent the use of cryptocurrencies”. The SIT will also be holding another round of meetings next month in Delhi. The meeting will discuss and review the use of cryptocurrencies.
Crypto Ban Not a Very Smart Idea According To Experts
The private sector is also divided on the issue of cryptocurrency regulation. Sarvesh Tyagi, a cyber law expert based in Delhi said, “it is doubtful that the SIT will succeed in banning the use of cryptocurrencies. Ban is not a solution. We need a regulatory authority”.
A blanket ban on the use of cryptocurrencies is not a very feasible solution as drug smuggling is a big problem, and in most cases, these transactions have nothing to do with use of cryptocurrencies.
Crypto Businesses are Fighting Back
Earlier this month the RBI made an announcement for banks and payment platforms under its management to cease the provision of services to businesses engaged in cryptocurrencies. “Banks have already sent notices to exchanges,” Sathvik Vishwanath, CEO of Indian exchange Unocoin said.
The RBI gave banks a 3-month window to “end the relationships” with crypto businesses. Vishwanath noted that crypto companies will be fighting back and challenge the RBI order in the Supreme Court as a consortium.