India Won’t Recognize BTC As Currency, Nor Does It Collect BTC Transaction Data

India continues its flirtation with Bitcoin and other cryptocurrencies. The Indian Parliament’s winter sessions started, and, as it turns out, BTC won’t be the star of the show. In fact, the lower house of the parliament asked the Finance Minister point blanc if there was a proposal to recognize Bitcoin as currency. The answer was a resounding “no.” 

According to AMB Crypto

“While more clarity is set to emerge in this context, some reports have claimed that the Indian administration is planning to make cryptocurrencies available as an asset. Additionally, others suggest cryptos will not be accepted as legal tender.

All of this information came in the form of a note. In that document, the Financial Minister also answered “whether the Government has allowed cryptocurrency exchanges as a legally permitted entity in India”:

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“Cryptocurrencies are unregulated in India. RBI has vide its circular dated May 31st, 2021, advised its regulated entities to continue to carry out customer due diligence processes in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML).”

So, as you can read, it’s the same old script the other countries are using. If that’s the case, what’s the cause for all the confusion?

Mixed Signals Coming Out Of India

NewsBTC has been on this case. Just three weeks ago, while discussing the India exchange’s remarkable growth, we said optimistically:

Discussions around regulations started to arise back then. India’s crypto exchanges and investors participated in off-the-record meetings with law enforcement agencies and banks hoping to reach a point of amicability.

The expectations are for the government to classify bitcoin as an asset class and for the Securities and Exchange Board of India to regulate cryptocurrencies and bring clarity, closing the doors to another ban.”

However, just a week ago, we reported that the Reserve Bank of India “is set to launch its CBDC by December.” And what was that news seasoned with? A ban, of course:

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“A bill was recently presented, and sets to shake things up for many of big name coins in India. The ‘Cryptocurrency and Regulation of Official Digital Currency’ bill will create a facilitative framework for an official digital currency to be issued by the Reserve Bank of India, and that will look to ban all private cryptocurrencies, which includes Bitcoin and Ethereum.”

It was a fair conclusion, considering. In early 2018, the Reserve Bank of India banned the buying and selling of cryptocurrencies by entities under the RBI’s jurisdiction.

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What’s The Indian Parliament’s Current Position?

The headlines from the recent session with the Financial Minister are those two. There’s no proposal to recognize Bitcoin as currency and the government doesn’t collect Bitcoin transaction data. Fortunately for them, the blockchain is an immutable ledger. They don’t have to collect a thing, it’s all there.

In any case, AMBcrypto sees it as:

“A crucial piece of information, especially since some bodies associated with the ruling party had called for central regulation of crypto. For instance, Swadeshi Jagaran Manch’s (SJM) Co-convenor Ashwani Mahajan had suggested that crypto-data around mining and transactions be stored only on domestic servers.”

Reporting on the same session, Asian News International saw another angle. “This is a risky area & not in a complete regulatory framework. No decision was taken on banning its advertisements.”

In another stage, former Finance Secretary Subhash Garg cleared things up. He created the bill that seemed to aim to ban all cryptocurrencies in India. Cointelegraph reports:

“In an interview with local news channel News 18, Garg clarified:

“[The description of the crypto bill] was perhaps a mistake. It is misleading to say that private cryptocurrencies will be banned and to intimate the government about the same.”

So, by “private cryptocurrencies” he didn’t mean Bitcoin or Ethereum, which have public blockchains. Got it.

Still, India’s confusion about cryptocurrencies is the main topic here. They don’t seem to know what to do about those pesky coins over there.

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Former Indian Finance Secretary Calls for Crypto Regulations

India as a country has a complicated relationship with the cryptocurrency industry. At a point in time, there was a ban put in place that essentially meant that crypto-related businesses could not operate and have access to banking services. The result of this was that several firms shut down, or had to move their operations abroad. The ban was eventually lifted.

Now, India’s former finance secretary Subhash Chandra has come out to state that the government should not overlook cryptocurrency but should instead, work to better regulate the industry. This comes as positive news for the crypto industry in the nation as Garg previously chaired the drafting of the “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019.”

Chandra Stands Up for Crypto

The comments by Chandra were first made during a recent virtual conference in which he explained why the government should give more attention to cryptocurrency. This attention, he feels, will be in form of a proper regulatory framework for the industry as well as a better understanding on the government’s part. 

“I don’t think we still have full clarity and understanding about how to regulate cryptocurrencies…Regulate, control cryptocurrencies but allow the crypto assets, encourage the crypto services,” he said.

He also touched on cryptocurrencies in a recent post on his blog in which he explained why the Indian government must take action now to regularise the industry. He made reference to the recent sale of an NFT for $70 million and explained that with the current growth of the crypto industry, its worth could very well eclipse India’s GDP. 

He also referenced the growth of initial coin offerings as a capital-raising effort for crypto companies and said that Indian companies will likely get into the space as well. while he acknowledged the issues that regulators might have with cryptocurrency, Chandra stated that the current growth rate is too big to ignore and that government would do well to regulate the industry as crypto assets will inevitably appear on more and more companies’ balance sheets. 

He called out institutions like the MCA and ICAI and advised them to set up proper standards for the reporting and treatment of crypto-related transactions as soon as possible. Finally, he touched on the possibility of a Central Bank digital currency stating that they are growing in popularity and should also be looked into.

“The bouquet of digital assets are expanding. The possibility of raising digital liabilities is also expanding. The regulators need to have standards for accounting, auditing and reporting of digital assets and digital liabilities,” the post said.

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India’s Crypto Ban May Extend to IPO Promoters

The extent of the anti-crypto sentiment in India seems to be deepening with initial public offerings (IPO) participants like promoters, investment banks, and lawyers likely to be barred from holding or investing in cryptocurrencies. Meanwhile, the threat of a blanket virtual currency ban continues to loom over one of the largest digital currency markets in the world.

SEBI May Ban IPO Promoters from Owning Cryptos

According to a report by the Economic Times on Monday (Feb. 22, 2021), IPO promoters in India who own cryptocurrencies may soon be prohibited from participating in public sales. While the Securities and Exchange Board of India (SEBI) has yet to issue any official communique in that regard, IPO stakeholders who spoke to ET say the securities regulator is already communicating its plans to investment bankers, securities lawyers, and other IPO participants.

For SEBI, the reason for the move is reportedly due to the fact that the securities regulator is not in favor of funds from IPO being moved into cryptocurrency investment positions. According to the ET report, SEBI does not want IPO participants to hold assets that could be deemed illegal in the country.

Commenting on the planned move to prohibit IPO promoters from crypto involvement, Mahesh Singhi, managing director of Singhi Advisors — an investment banking firm — remarked:

“In most situations currently, the money raised through IPO or even through other routes would come in the hands of promoters and investors, giving substantial liquidity in their hands and there is a fear that this could be used for speculation. The regulator had been giving indirect messages on this and in certain cases even other investors are cautious when it comes to promoters holding crypto assets, as these could be banned in India.”

Indeed, as previously reported by BTCManager, India is reportedly close to a blanket crypto ban with cryptocurrency holders to be given a grace period to sell-off their virtual currency assets. Earlier in February, the Indian government revealed that it was considering fast-tracking the controversial crypto bill via an ordinance process executive order.

Meanwhile, some IPO promoters are already pre-empting the crypto ban by issuing affidavits stating that they will sell their cryptocurrency holdings if the government follows through with the virtual currency ban. Apart from the threat of a blanket crypto ban, the country’s finance ministry also proposed a Bitcoin tax law back in December 2020.

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