The government of India enforced a blanket ban on the buying and selling of all digital assets which came into effect earlier on July 5th.was set to come into effect July 5th, following a three month warning from April. It was a move intended to prevent illicit activities including money laundering, and follows a similar move two years ago that enforced the complete destruction of high-value cash notes. India has known to have taken a negative stance on cryptocurrencies in the past that have caused regulatory clashes and huge price swings within the local market. In mid-august, The Government of India also considered launching Crypto tokens for financial transactions in the country, even as the existing ban on cryptocurrency continued.
Meanwhile, various regulators and their associative bodies are formulating ways to bring about policy changes within the blockchain and cryptocurrencies market in India. The Securities and Exchange Board of India (SEBI) would be part of the ongoing court hearing which is also being closely followed by various corporations and cryptocurrency groups around the nation. The Securities and Exchange Board of India (SEBI) just released an annual report that highlighted an interesting move to send certain government representatives to the UK, Switzerland, and Japan to conduct a research analysis into their implementation of various cryptocurrency laws and regulations. These nations have been chosen due to their early implementation of positive regulatory stances nurturing the growth, trading, and transmitting of knowledge of cryptocurrencies and blockchain technologies.
Government concerns for Blockchain
The annual report had several concerns for the regulation of cryptocurrencies within India as mentioned here,
“Developments on this front need to be monitored as some trading may shift from exchanges to peer-to-peer mode, which may also involve increased usage of cash. Possibilities of migration of crypto exchange houses to dark pools/cash and to offshore locations, thus raising concerns on AML/CFT (anti-money laundering/combating the financing of terrorism) and taxation issues, require close watch.”
The government and SEBI’s main concern has always been with regards to customer’s data, anti money laundering, and cryptocurrency’s inherent volatility which lead to a lot of market speculation leading up to December 2017 and eventually causing their prices to crash. As Anand Bhushan, a partner at Shardul Amarchand Mangaldas & Co mentioned to Bloomberg earlier,
“Nobody is able to price the risk currently. The minute you have clarity on exchanges and whether digital currencies can be used as a medium of exchange or payment, or if it is a commodity, there will be less speculation and much more stability in pricing,”
Why Japan, Switzerland, and the UK?
The Securities and Exchange Board of India (SEBI) chose Japan, Switzerland, and the UK as the strategic locations to send its senior members for research primarily because of their past stances and decisions with regards to cryptocurrency regulations. For instance, Japan’s Financial Services Agency was one of the first financial agencies in the World to legally regulate cryptocurrency exchanges and establish a framework for their operations and growth within the country.
“Effectively, Japan is the first and only country that has a proper legal system regulating cryptocurrency trading. That’s a big deal. Before the law regulating cryptocurrencies, people worried about what would happen to their money if an exchange were to go bust.” as quoted by Midori Kanemitsu, the chief financial officer of one of Japan’s largest cryptocurrency exchange operator, bitFlyer Inc earlier this year.
Similarly, Switzerland and the UK have long been known as havens for foreign financial reserves and have introduced comparatively efficient laws allowing for the trading of cryptocurrencies. Crypto Fund AG, a Zug-based subsidiary of the Swiss Crypto Finance Group (CFG) had acquired a permit from the country’s financial market regulator, FINMA (Swiss Financial Market Supervisory Authority) to distribute funds to qualified blockchain investors recently as an example of steps made by the Swiss government in the right direction.
The future of cryptocurrencies in India
The strategies taken by the SEBI have so far proven to be negative towards cryptocurrencies and the proliferation of the blockchain space in India. They have generally tended to shut the Indian market from the rest of the World even though cryptocurrency and blockchain related jobs continue to see a 50 percent growth this year along with artificial intelligence (AI). If the SEBI introduces a positive regulatory framework based on this ongoing research, the future of cryptocurrencies and blockchain technologies could seem positive for India and the surrounding subcontinent.
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