India’s most important financial risk studying panel called the Financial Stability and Development Council (FSDC) chaired by the Finance Minister has called for a sweeping ‘ban’ on the use of ‘private’ cryptocurrencies in India. This could well be the last straw in the Indian cryptocurrency ecosystem which has been fighting a losing battle against the country’s policymakers.
Panel study
In December 2017, the government of India had set up a study panel to assess the digital currency use and utility in the Indian context. The submission of the draft regulations in July was delayed with representatives from the Reserve Bank of India and the SEBI, the premier market regulator in the country.
With the panel needing time, RBI had categorically stopped banks from allowing crypto-based transactions by merchants in July itself.
Therefore, the current proposal of considering a ‘blanket ban’ does not appear to be a surprise.
RBI
According to the Indian government’s Press Information Bureau (PIB):
“The council…deliberated on the issues and challenges of crypto assets/currency and was briefed about the deliberations in the high-level committee chaired by the secretary (economic affairs) to devise an appropriate legal framework to ban the use of private cryptocurrencies in India,”
Russia sought a greater role for international regulatory collaboration
Earlier in the week, Russian FATF wants greater control on crypto trade worth $9,000. Crypto-citizens of Russian confederacy has one more issue to worry about, thanks to the latest announcement by financial watchdog based out of Paris – FATF (Financial Action Task Force) as of Oct 19, 2018.
According to FATF, “As part of a staged approach, the FATF will prepare updated guidance on a risk-based approach to regulating virtual asset service providers, including their supervision and monitoring; and guidance for operational and law enforcement authorities on identifying and investigating illicit activity involving virtual assets.”
FATF Rules
FATF had introduced rules for crypto exchanges in June a step forward from the non-binding guidelines set up by the organization back in June 2015. The key aspects that are introduced are the subjection of cryptocurrencies to AML as well as CFT or Counter-terrorism Financing.
Way Forward
The key focus of FATF is the role of a facilitator, an overarching organization working with regulatory bodies of different nations so as to overcome the issues, limitations and other troubling perspectives of cryptocurrencies. The organization’s primary focus currently is to work with countries which have banned cryptocurrencies and address concerns with respect to Anti-Money Laundering and to report trading operations which are considered to be illegal, Counter-Terrorism Financing (CFT) regulations.
However, specific to the Indian ecosystem, the regulatory bodies are not considering cryptocurrencies as legalized digital assets and do not acknowledge their use in the banking system. In the latest incident, start-up owners were held in legal custody for setting-up of an ATM in cryptocurrencies in Bengaluru, leading to widespread protests by members of the industry.
The legal attempts by these stakeholders to get the government to reconsider have all led to the Council declaring a ‘blanket ban’ on their use and trading in the country.
