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India’s central government is reviewing key pieces of legislation that could ban cryptocurrencies in the country.
Working with regulators and other stakeholders, the government is addressing three key issues. First, whether or not to impose a total ban on cryptocurrencies in India. If they decide not to, the next consideration will be how the authorities should regulate them. Finally, they will also consider what types of activities should be allowed and which should be discouraged.
The Cryptocurrency and Official Digital Currency Regulation Bill, 2021 was introduced during the budget session of the Indian Parliament in the spring. However, for undisclosed reasons, no action was taken. As the government scrutinizes the bill clause-by-clause, the situation is unlikely to be resolved in the next monsoon session of parliament. The government previously considered convening a new group of experts to discuss crypto regulation following a similar group in 2017.
RBI banning attempts
In 2018, the Reserve Bank of India (RBI) banned regulated entities from dealing with cryptocurrency-related businesses and clients. After filing a petition with cryptocurrency exchanges in India, the Supreme Court overturned this measure in March 2020.
While not an official decision, the RBI recently released an informal request with the same intent as its 2018 action, that lenders sever ties with crypto firms. This would have affected the functioning of some crypto exchanges, such as WazirX. However, the RBI recently clarified its statement, allowing companies to do business with crypto companies.
Crypto exchanges in India
Amid all this regulatory uncertainty, the global crypto exchanges are still considering how to enter the Indian market. Apparently, Kraken, Bitfinex, and KuCoin have all started discussions to better understand the Indian market and entry points. While one exchange has already started due diligence for an Indian company it is considering acquiring, the other two are still weighing their options. They are considering setting up their own subsidiaries in the country or buying a local business.
Binance set a precedent for the latter option by purchasing WazirX in 2019. However, India’s oldest crypto exchange has recently struggled. Aside from the issues with the lenders mentioned above, the exchange has recently struggled to cope with the peak in demand volume for Dogecoin. On top of that, India’s financial watchdog, the Enforcement Branch, is currently investigating WazirX for allegedly facilitating money laundering.
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