Committee to Draft Crypto Law
An interministerial committee under the chairmanship of Subhash Chandra Garg, Secretary of the Department of Economic Affairs, has been constituted to draft the regulatory framework for cryptocurrencies. Included on the committee are representatives from the Ministry of Electronics and Information Technology, the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Central Board of Direct Taxes.
The committee is “considering all aspects related to virtual currencies and crypto assets … including banning/regulating,” according to the Finance Ministry’s summary report released in March of the government’s activities in 2018.
The legal framework for cryptocurrencies in India was expected to be finalized in July last year, but no framework has been announced so far. This has led to speculation about what the recommendations entail, such as the recent media report claiming that the bill entitled “Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019” has already been circulated to relevant ministries for discussion. The Indian crypto community has urged the public not jump to conclusions as the media reports only cite anonymous sources on the matter.
Working With FATF and G20
India’s “Department of Revenue has been actively involved in the working papers being developed by the FATF on various issues (such as virtual currency, proliferation financing among) which will act as guidance for the member countries,” the Finance Ministry’s summary report also reveals.
The Financial Action Task Force (FATF), a global standard-setting body created to combat money laundering and terrorist financing, told the G20 recently that it is updating policies on crypto regulation which will be presented at the G20 summit in June. India is a G20 country and will be attending the summit and participate in discussions about crypto regulation.
RBI Banking Restriction
In addition to several warnings about the risk of investing in cryptocurrencies, the RBI issued a circular on April 6 last year prohibiting regulated entities from dealing in cryptocurrencies or providing “services for facilitating any person or entity in dealing with or settling” cryptocurrencies. Financial institutions had three months to exit crypto-related relationships.
The RBI detailed that “Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/sale” of cryptocurrencies.
While the banking restriction has hurt a number of local crypto businesses, some have found a solution to the ban in the exchange-escrowed peer-to-peer crypto trading model. Meanwhile, the Indian crypto community has been actively campaigning to end the ban.
Supreme Court Hearing
Multiple writ petitions have been filed with the Indian justice system to lift the RBI ban. They were scheduled to be heard by the supreme court since September last year but the case has been continually postponed. The next hearing date is July 23. The supreme court has also asked the government to submit a report of the regulatory framework for cryptocurrencies.
Discussions at Blockchain Summit
In February, the Department of Science and Technology, the State Government of Uttar Pradesh, the Ministry of Commerce and Industry, the Ministry of Law and Justice, the Ministry of Human Resources Development, and the Department of Information Technology gathered at Blockchain Summit India to discuss various crypto-related topics including regulation.
The event’s fintech partner, Cashaa, announced afterward that the policymakers discussed how to speed up crypto regulation. “The regulation is planned to be implemented by end of financial tenure,” Cashaa wrote, noting that ICOs and STOs were also discussed.
Potential Central Bank Digital Currency
Replying to the question asked by Lok Sabha whether the government is considering introducing its own national cryptocurrency “in place of bitcoins,” the Ministry of Finance confirmed on Dec. 28 last year:
The inter-ministerial committee under the chairmanship of Secretary, Department of Economic Affairs, is examining all issues, including the pros and cons of the introduction of an official digital currency in India.
SEBI Crypto Study Tour & Committee
In its 2017-18 annual report, SEBI revealed that it had “organised study tours to Financial Services Agency (FSA) Japan, Financial Conduct Authority (FCA) UK and Swiss Financial Market Supervisory Authority (FINMA) Switzerland to study initial coin offerings and cryptocurrencies.”
The regulator constituted the Committee on Financial and Regulatory Technologies on August 3, 2017, “In order to reap the opportunities provided by fintech” and “to deal with relevant risk and challenges,” SEBI detailed. It also noted that new technology, including cryptocurrency, “is affecting financial markets through various channels.” The committee is under the chairmanship of Shri T.V. Mohandas Pai, Chairman of Manipal Global Education.
Cybercrime Unit for Crypto
India’s Union Home Minister Rajnath Singh inaugurated a national cyber forensic lab and the Delhi Police’s cybercrime unit called Cypad to help detect fraud online, including those involving cryptocurrency, as news.Bitcoin.com previously reported.
The national cyber forensic lab includes a crypto forensic unit. It is equipped with technology to recover data from damaged hard disks, perform cryptocurrency analysis, and ensure malware forensic data can be retrieved from 33,000 kinds of mobile phone models available on the market.
Working With Canada
Cryptocurrency was a major topic of discussion at the 16th meeting of the Canada-India Joint Working Group on Counter-Terrorism held in Ottawa on March 26 and 27. India’s delegation was led by Joint Secretary for Counter-Terrorism from the Ministry of External Affairs, Shri Mahaveer Singhvi. The meeting involved senior representatives from both governments, according to a press release by the joint working group.
Among other items on the agenda, “The delegations reviewed efforts underway to address new and emerging challenges posed by virtual currencies,” the announcement reads, adding that “The meetings concluded with agreement on a joint action plan” which includes “joint capacity building and information and technology sharing.”
A detailed study conducted by the Institute of Chartered Accountants of India (ICAI) “on accounting standards and disclosures of cryptocurrency in financial statements of companies” was requested by the Indian Ministry of Corporate Affairs in January last year, according to ICAI member Debashis Mitra. The institute, a statutory body established by an Act of Parliament, went on to launch a course on cryptocurrency and blockchain technology for professional accountants in August last year.
RBI’s Regulatory Sandbox
The RBI recently published a draft framework for a fintech regulatory sandbox that welcomes businesses and applications using smart contract blockchain technologies. However, the document also has “An indicative negative list” of products, services, activities, and technology “which may not be accepted for testing.” The list includes cryptocurrency, crypto services, crypto trading, crypto investing, as well as settling in crypto assets. It also includes initial coin offerings and any products or services which have been banned by the government.
It should be noted that India is undergoing an election cycle and many decisions made by the current government administration could be null and void when the next administration takes office.