Cryptocurrency ban lifted in India: Experts hail the move, but advise caution
Industry experts welcomed the move by the Supreme Court but at the same time suggested cautionary measures like improving data privacy and AML policies.
Cryptocurrency has mostly been warned against in India because of the risks it poses. Banks in India were also banned from dealing in cryptocurrencies until today after the Supreme Court quashed this restriction. Entities regulated by the RBI had also been restricted from dealing with virtual currencies.
Cryptocurrency is now expected to get a big boost in India with the digital asset already popular in global markets. The virtual currency does have its fair share of scandals and controversies especially Bitcoin is the most popular cryptocurrency. Bitcoin has also become a popular among hackers as a form of ransom. This however hasn't affected the performance of Bitcoin which rose 9,000,000% this past decade.
The cryptocurrency industry in India is understandably excited on this move by the Supreme Court.
"Owing to its susceptibility to frauds, cryptocurrency faced a lot of initial backlash. However, as long as crypto-firms are maintaining thorough identity checks and performing audits (as they were doing earlier) any company should be allowed to trade. We view the lift of the ban as a forthcoming step. With the regulation now in place, Cryptocurrency firms should start focusing on deploying stronger KYC, user data privacy, and AML policies. These measures also reinforce the government's key concerns such as financing illegitimate activities, money laundering, and terrorist financing." - Arpit Ratan, co-founder of Signzy, a RegTech startup said.
Highlighting the impact of the RBI ban on cryptocurrency, Ganesh Vasudevan, Research Director, IDC Financial Insights, India said, "The Supreme Court judgement lifting the blanket restriction placed by RBI on banking services from dealing in crypto currency is a welcome move. While crypto currency as such were not banned, the banking services restriction by RBI had completely crippled the crypto currency settlements in India resulting in winding up of most, around 20, of the crypto exchanges in India post the RBI notification in 2018. Post the SC judgement all the erstwhile crypto exchanges are expected to revive their crypto exchange platform in India. Further we believe that depending upon the classification of crypto currency as asset or monetary instrument; appropriate regulatory agency, either RBI or SEBI, will be laying down the operational guidelines to manage the crypto currency market."
Prasanth Sugathan, Legal Director, SFLC.in commented on how the RBI's move should have been towards a policy and not completely stopping cryptocurrency exchange in India.
"The Regulator instead of opting for a progressive policy that would allow for innovation and growth of startups in this area opted for a policy that completely let to shutting down of the sector. Instead of adopting an approach of throwing the baby out with the bathwater, the regulator should have adopted a policy that would have protected the interests of the industry as well as the consumers. As the Court rightly pointed out, RBI failed to show any empirical data on the harm caused by virtual currency or firms dealing in virtual currency to the banking sector. Policy making could not be based on hypothetical scenarios and there should have been proper consultations with the stakeholders before issuing such a policy. We hope that the judgment would result in the Government adopting a Virtual currency policy that would be forward looking and protects the interest of the industry as well as the users," Sugathan said.
Mishi Choudhary, Technology Lawyer and Managing Partner at Mishi Choudhary and Associates said, "A blanket ban was never the correct solution to address any issues with cryptocurrencies. Supreme Court has correctly dismissed it as disproportionate. An informed regulator responsible for licensing and supervising virtual currencies, to study and periodically assess new efforts to use technology to address financial exclusion with clear opinions working in tandem with the industry should be considered."