India and cryptocurrency have never been the best of friends. The government set out its stall in 2013 when it first warned of the risks of investing in “Virtual Currency” (VCs), such as, Bitcoins, Litecoins, BBQCoins, Dogecoins, etc”, since then cryptocurrencies have come about as close to being banned as something can be without actually being made illegal, despite many headlines to the contrary.
Six years after the battle lines were first drawn, we may be getting an insight into the current thinking of the government surrounding this new asset class and what precisely it is they are worried about.
Proposal Due in February
As we reported in December, a proposal is due this month following December’s second interdisciplinary meeting on crypto, where the tone was said to be the most positive it has ever been regarding cryptocurrencies, which is to say a grudging acceptance of its long-term existence rather than an embracing of the technology. Indian news outlet Quartz India managed to speak to one of those on the committee led by bureaucrat Subhash Chandra Garg, who revealed what is troubling the government with regard to cryptocurrencies:
If Bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilizing the fiat currency is a major concern for them (the Garg panel). The overall impact on the financial ecosystem that it is likely to have is still unclear and it has been a challenge to convince them on this particular point.
Currently, the prospect of any cryptocurrency overtaking a nation’s fiat system is highly improbable, even in somewhere like Venezuela where it is seeing huge adoption. But, it seems that lawmakers will need more convincing of this fact before their minds are eased on the matter
Is a Rule Change Expected?
The current state of crypto in India is similar to many other countries at the moment, in that it falls into a kind of gray area where it is not considered illegal, but it is also not considered a form of currency. This means that it can legally be passed from individual to individual, but can’t be used legally to pay for goods and services. This limits its use case to personal transactions and speculation, a situation that seems unlikely to change in the future.
Those involved in cryptocurrency in the country, such as exchange operators, are likely to be more worried about the prospect of further restrictions than excited about the relaxation of the rules, given the fact that little seems to have changed in the minds of those who matter in six years.