And now, in India, get ready for the crypto deluge.
This week, the country’s Supreme Court ruled that a ban on cryptocurrency trading was unconstitutional.
The ban, put in place by India’s central bank, stretches back almost two years, to April of 2018. Back then, the central bank stated that banks could not offer services for digital currencies, spanning bitcoin and its brethren. But now, as noted by CoinDesk, traders will be able to deposit rupees from their bank accounts to crypto exchanges.
“This is the first step towards embracing cryptocurrency in India, which has the potential of becoming one of the largest crypto markets,” Ashish Singhal, chief executive of the cryptocurrency exchange CoinSwitch.co, told CoinDesk.
Before the ban, said the executive, the country had seen trading volumes to the equivalent of about $60 million each day.
One way around that ban? Individuals had opted to embrace peer to peer platforms. But now, by enlisting the aid of banks and exchanges, and by tying activity directly to accounts, liquidity should improve, which in turn may smooth volatility.
But then again….
There may still be curbs on the crypto industry instituted by other means, and perhaps specifically by legislative means rather than through the central bank — or at least a path paved that leads to more direct development of what ends crypto might serve moving forward.
Last year, India’s government floated a “draft” of legislation that had the header: “Banning of Cryptocurrency and Regulation of Official Digital Currencies.” That bill was submitted to the court in August of 2019. There seems to be a bifurcation here. The bill (which still has not been introduced to parliament) would ban the use of crypto as currency, and prevent many activities tied to crypto (such as trading or settlement). Might the mechanics of regulation, of restriction, be shifted from the central bank to parliament?
There’s still the chance that the government might introduce that law against cryptos overall, which would short circuit all the excitement from this week.
It should be noted here that cryptos have not been deemed legal tender (as in, able to be used in commerce), yet the exchanges themselves are not illegal.
If past is prologue: way back when the RBI banned the crypto trading, it pointed to the fact that “virtual currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.” That edict came during a time when ICOs ruled the land.
Since then, of course, we would argue that the focus has turned more toward blockchain, the rails (of sorts) that underpin the exchange of digital assets. And a number of central banks — China among them, of course — have been exploring the issuance of digital fiat.
Earlier this year, the National Institute for Smart Government proposed a “digital rupee” in a proposed strategy for national blockchain efforts. That rupee, issued by the central bank, would run over blockchain. It’s interesting to note, too, that the Supreme Court ruling this week now lets banks service crypto firms (for crypto to fiat, but not with crypto alone as legal tender). This might pave the way for a full, joint financial services/government push for a national digital version of the rupee.
Perhaps it might be fair to view this week’s Supreme Court ruling as a way for the coins that have survived the wild west of ICOs – bitcoin and ethereum among them – to gain a bit more mainstream acceptance amid regulation (and trading revenues for services companies, not to mention tax revenue for the government on capital gains). There’s also the chance that VC investment into the country, which has in the past focused on logistics and on mobile payments, might find a lure in crypto-related endeavors.
In the meantime, there seems to be no time lost by companies looking to capitalize sooner rather than later on the fact that the Reserve Bank now must lift its ban. In one example in Mumbai, reported CoinDesk, CoinDCX, a crypto exchange, added support for bank account transfers.
Much remains to be seen, but for now, the courts have paved the way for at least some evolution in India’s crypto space.