The Impact of Reserve Bank of India’s Policy on Crypto Industry
The Reserve Bank of India (RBI) has taken an anti-crypto stance. For example, banks are unable to carry out transactions with crypto-related entities. According to a prominent attorney in India, Jaideep Reddy, the stance will make the existing situation much worse.
During a panel session on a “Way Forward for India Cryptocurrency Exchanges” that took place on August 4, 2018, Reddy stated:
“From a policy perspective if you look at what this step achieves is that it drives the whole market underground. When you say that people cannot transact in this industry through proper channels, what you are actually saying is that you have to buy it in cash and sell it in cash and as a result, all concerns that the RBI has started – money laundering, consumer protections, and market integrity – the circular makes those concerns worse.”
Reddy further added that the restrictions lead to an enhanced chance of malfeasance, poor record keeping, and theft and money laundering. And that the policy restrictions cause the market to be hidden and opaque.
Other speakers shared their views on the Indian regulatory system at the panel session. Ajeet Khurana stated that his platform is not looking to launch a p2p exchange until the regulations clear out and that he believes that decentralized exchanges are the future of his platform. Sathvik Swaminathan, another speaker, stated:
“Some of the exchanges have a policy in which if the user exceeds an ‘X’ amount of rupees or bitcoin, then they will want to have an additional set of verification documents so that they know what the person is a high value, the high-risk customer. You will know what they want to do.”
Ultimately, the main consensus at the panel was that the restrictions are based upon a misunderstanding about cryptocurrency, especially that it is being used as a competitor against the rupee. However, crypto is not seeking to be defined as currency under India’s legal definition, but rather, as a separate asset class.