Cryptocurrency may not be banned in India

By NT Bureau Published on Jul 12, 2018 02:58 PM IST

Chennai: In the current scenario where the Reserve Bank of India has been adamant about the cryptocurrency rules, a new finding has stated that India is not going to put a blanket ban on digital currencies, but rather treat them as commodities.

Revealed by a news outlet recently, the report stated that an anonymous source in the government told that a Finance Ministry panel has ordered a study on cryptocurrencies, which may suggest that the government would treat them as commodities.

A senior government official with knowledge of the panel’s discussion has told he media agency that they doubt the government aims to ban cryptocurrencies.

Regulating trade

The source said regulators’ main concern is how to effectively regulate the trade and identify 'where the money is coming from'. They added that, "allowing it as a commodity may let us better regulate trade and so that is being looked at."

The official had said the committee is mostly concerned about tracking investors and funds in order to fight money laundering and illicit financing.

"Trade is not a criminal offence. Most of us trade in various asset classes in the stock market. So how is this [cryptocurrency trading] any different? What has to be in place is a mechanism to be sure that the money used is not illegal money, and to track its source is the most important thing," the official has been quoted as saying.

According to Quartz, former Reserve Bank of India (RBI) deputy governor R Gandhi opined that treating cryptocurrencies as commodities would clearly demonstrate to investors that crypto is not real currency.

He said, "If these are used to settle transactions, then it acquires the nature of currency. So that is one thing that one needs to be wary of. But if people want to invest in a commodity then that is different, because then we can assume that they are aware of the risks involved."

What this means to banks

The national banks in the G20 see cryptocurrencies as a major risk. Much of their focus is on the instability that they create. However, crime statistics like this help to reinforce their views that non-fiat currencies should be avoided.

There is a problem with this view. Malware and cyber thefts from the traditional banking system exceeds this number. The recent arrest of the head of the Carbanak malware syndicate revealed that the malware had made over $1 billion in five years. It is just one of several malware families targeting banking.

Alongside this, we have seen attacks against the Swift inter-banking system. While the Swift network makes it clear that this is not a compromise of their central systems, it has still be used to facilitate the thefts.

In May, the RBI announced that it will no longer provide services to any person or company that deals with cryptocurrencies, though the bank stated it is planning to issue its own cryptocurrency in the future. In January the Indian Finance Ministry criticized Bitcoin (BTC) and other digital currencies for their lack of intrinsic value.

The Indian Finance Ministry said, "There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes, which can result in sudden and prolonged crash exposing investors."

Thefts top $1.7bn

The rate at which cryptocurrency thefts are running is accelerating as shown in the first three months of 2018. The total amount of theft stood at around $670 million. By the end of June that number had soared to $1.726 billion and experts state that at this rate thefts could cross well over $4 billion by December.

Female investors wage bigger bet

In a study conducted by New Delhi-based cryptocurrency exchange BuyUCoin over a period of three months it stated that it has found Indian women superseded men in terms of investments made – with the former set making an average investment of $2,305 compared to the latter’s $1,017. Women in Bangalore, India’s self-proclaimed Silicon Valley, seemingly had the most-risk appetite as they invested nearly $3,000 on average in digital assets compared to women in other cities. However, women formed only eight percent of the respondents.

The average age of users was under 30 years and 40 years for males and females respectively, with the most users coming from India’s capital city of New Delhi at 22.03 percent as per total responses collected. Mumbai, the country’s financial capital, recorded 14.42 percent active cryptocurrency traders followed by cyber-hub Bangalore at 13.91 percent.