After a temporary ban on digital currencies, the Indian government proposed a September deadline for the announcement of rules regarding crypto-currencies. This now seems unlikely.
Crypto-currencies were initially outlawed by the Reserve Bank of India (RBI) in April. The RBI explained its ban on crypto-currencies saying it had “repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies.”
After a challenge by the Internet and Mobile Association of India, the Supreme Court of India upheld the national ban and indicated it would reconvene in September to pass further judgement, Asia Times reported in July.
While insiders had expected a judgement by September, a recent Quartz report cited senior government officials saying judgement would come by the end of the year. The report said a finance ministry panel, under Subhash Chandra Garg, secretary in the Department of Economic Affairs, was still considering how to act.
Other media reports have speculated that India is planning to release its own “crypto tokens” that would not be exchangeable for traditional, fiat currencies. However, India-based blockchain lawyer Varun Sethi told Asia Times there were no such plans in place. “Reports of government issued crypto assets are doing the rounds in the media but (they) may well only turn out to be speculation.”
Sethi does acknowledge that the government would seek to control the market. “Traditionally the government has favored centralization of control and decision making, hence it seems that, if any crypto is to be approved, the government may well be want to take control. The current stance of the government seems that they are in favor of blockchain but not in favor of cryptos since it dilutes authoritative controls. By issuing a central crypto currency or asset, they win both sides of the case,” he added.
The Indian government has repeatedly voiced its support for blockchain while taking a cautious approach to cryptocurrencies. “From an investor protection viewpoint, there are many scams and huge erosion of retail investor funds; however from a technology perspective the government surely wants to implement blockchain technology but doesn’t want to take a call yet on cryptos. They want to collect tax, however they don’t want to legalize it completely yet. This throws up an interesting anomaly,” said Sethi.