Cryptocurrencies are currently in a tough spot in India as the Reserve Bank of India has made it illegal to trade cryptocurrencies in India. The crypto community has challenged this decision in the country’s apex court, the Supreme Court of India, and in the last hearing on February, the government has sought 28 days to come up regulations regarding crypto. The next hearing is scheduled to happen on 29th of March, with the next hearing approaching fast, many in the crypto community are both excited and worried. The RBI’s order is being challenged by pointing out the fact that since Bitcoin is not a currency or money, technically the central bank does not have jurisdiction over the matter.
The order issued by the Central bank bans anyone, especially the banks, from dealing with cryptocurrencies and companies that deal with it. This order was issued in March and came into effect in July, effectively curbing all crypto related activities. The crypto community has organized and challenged the order in the Supreme Court of India. As always, the people in the industry have reacted to the adverse situation is by innovation, the exchanges were quick to adapt and most of them have adopted a P2P(Peer to Peer) system which effectively bypasses the banks. All other trades are happening in crypto to crypto pairs, so in effect, one can still carry out business as usual but it takes a lot of effort and time to bypass the law. We can’t expect much from the Supreme Court as it will probably adopt the proposal put forward by the government and try not to intervene in the process as much as possible. The whole approach of the Indian government towards cryptocurrencies is based on the idea that it is something that is used for all the bad reasons, rather than a futuristic technology that can change the world. The government is also worried about missing out on the crypto revolution and probably won’t roll out a complete ban.
RBI ban and its effects
As mentioned before, the ban by RBI has impacted the industry very badly and gave rise to what can be described as a crypto winter in the country. The ban meant that banks could no longer provide services to companies involved in crypto. This effectively meant that crypto to fiat services could no longer take place as exchanges cannot put money into the account of its users. Companies have tried many ways to get around the ban, mainly by the use of decentralized exchanges and other methods which avoids banks. This has met with some success but the ban still hampers progress.
The Bahrain government is specifically targeting Indian firms affected by RBI’s (Reserve Bank of India) ban on trading with crypto. In order to attract Indian firms, EDB (Economic Development Board) had organized a roadshow in Mumbai to attract fintech companies in December. Along with this, EDB has signed a Memorandum of Understanding (MoU) with the Maharashtra government to provide a framework for co-operation to promote fintech in their respective markets. If all goes as planned companies affected by RBI’s ban could simply move to Bahrain circumventing the ban. This will be beneficial to both the companies moving to Bahrain and Bahrain itself. When talent and capital move out of India to Bahrain, the Indian government might be forced to rethink its ban on crypto.
The move by Bahrain shows the need for adopting a regulation that is needed for supporting companies involved in this new industry and innovates, rather than bring an all-out ban which might result in talent and capital flowing out of India. The government proposal that will be submitted in front of the Supreme Court is key and will have a huge influence over the decision taken by the court. Even though this will be as reported by some news outlets “the last opportunity” for the Government to clarify its stance on crypto in front of the court, but the government could put one final excuse before the courts to further delay the process. Elections in India are coming up and this can be put forward as a reason by the government that the courts will likely accept to delay the submission.
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