Courts could Determine the Status of Bitcoin in India

April 9, 2019

Although the use of digitals assets such as Bitcoin (BTC) is not banned in India, a circular released by the Reserve Bank of India (RBI) in April 2018 has prohibited local banks that work with the central bank from dealing with Bitcoin and crypto exchanges since July of that year.

In February 2019, India’s Supreme Court gave the government four weeks to draft a cryptocurrency regulatory framework that would decide the legal landscape of the crypto market in India for the foreseeable future.

The outcome of an upcoming March 29th hearing could very well determine the future of Bitcoin and the crypto exchange market in the South Asian country.

While cryptocurrencies remain a regulatory grey area in India, it is not illegal for crypto traders to use cash to purchase or sell Bitcoin through local over-the-counter exchanges and peer-to-peer (P2P) trading platforms.

Although the central bank has pushed for a blanket ban on crypto trading, the Department of Economics Affairs is reported to have reached a consensus that does not completely dismiss cryptocurrencies as an illegal means of payment.

An emerging concern is that it will become increasingly difficult for the government to prevent the use of cryptocurrency trading to process illicit earnings from criminal activities, should crypto trading moves from strictly regulated exchanges to P2P platforms. It is therefore possible that India could reverse the RBI’s ban based on concerns about the potential risks involving money laundering.

Recent trips to Japan by officials of the Securities and Exchange Board of India to better understand the island country’s regulatory frameworks are telling, as Japan has facilitated the growth of its crypto exchange market through the adoption of pro-cryptocurrency and blockchain policies.


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