Indian Government Not Considering Total Cryptocurrency Prohibition
India is once again in the cryptocurrency news as recent reports indicate the government has no intention of banning virtual currencies. It has always been difficult to get a definitive stance from the government concerning the emerging market. The latest news coming out of the country doesn’t make the situation any clearer.
Cryptocurrencies are Commodities
The government in India via the ministry of finance set up a committee to examine the country’s cryptocurrency market. According to an anonymous source with inside knowledge of the committee’s deliberations, there is no plan to ban cryptos in India just yet. The source also went on to say:
I don’t think anyone is thinking of banning cryptocurrencies altogether. The issue here is about regulating the trade, and we need to know where the money is coming from. Allowing it as a commodity may let us better regulate trade, and so that is being looked at
If India decides to classify cryptos as commodities, then they would be emulating countries like the United States. Apart from the significant tax implications, such a characterization would firmly identify cryptos as an emerging asset class in the country. Commenting on the possibility, Coindelta co-founder, Shubham Yadav said:
Though cryptocurrencies belong to a new class of financial assets, we can still welcome them as commodities and not currencies because of their [highly] volatile prices. Many countries have been already going in this direction, including the U.S.
Former Reserve Bank of India (RBI) deputy governor, R Gandhi, also believes that classifying cryptos as commodities vastly favorable the status quo.
If these are used to settle transactions, then it acquires the nature of currency. So that is one thing that one needs to be wary of. But if people want to invest in a commodity then that is different, because then we can assume that they are aware of the risks involved.
Cryptocurrency Regulations Will Legitimize the Market
While the committee is less keen on banning cryptos, reports indicate that they are weighing suitable options for effectively regulating the market. One of its mandates is to prevent the use of digital currencies in perpetrating financial crimes and supporting terrorist operations. Commenting on the matter, a top government official said:
Trade is not a criminal offense. Most of us trade in various asset classes in the stock market. So how is cryptocurrency trading any different? What has to be in place is a mechanism to be sure that the money used is not illegal money, and to track its source is the most important thing.
By looking to legitimize the market with strict regulations, the government seems at odds with the RBI. Earlier in the year, the RBI mandated Indian banks to cease all services to cryptocurrency exchange platforms in the country. The ban which came into effect on July six prohibits banks from facilitating cryptocurrency transactions in India.
Since the announcement of the ban, there has been a lot of dissent from crypto proponents in the country. However, the nation’s courts have so far dismissed all challenges to the ban which is already having some degree of impact in the Indian crypto scene.
Should the Indian government classify cryptocurrencies as commodities? What impact do you think positive regulations from India would have on the cryptocurrency market? Let us know your thoughts in the comment section below.
Image courtesy of Ethereum World News archives.