Stakeholders in India’s burgeoning cryptocurrency industry, who were laughing their way to the bank till recently, are now wandering around in a fog as the jury is still out on whether the government will ban the controversial decentralized digital currencies.
Though the five-million-strong crypto community has been on pins and needles with the authorities time and again warning speculators of risks in buying and selling bitcoin, ether and other global altcoins on the internet, the dyed-in-the-wool investors and traders made their pile by keeping faith with the virtual payment system based on the up-to-the-minute technology of blockchain, the indelible digital ledger that guarantees security and transparency of transactions.
But the Reserve Bank of India’s (RBI) latest diktat asking banks and other financial institutions to blackball their account-holders dealing in the global cryptographic forms of money has come like a bolt from the blue for the bitcoin brigade as well as bourses accused of throwing know-your-customer norms to the winds.
Fearing scams and misuse of the digital cash for illegal activities like drug-pushing, the federal bank has told banks to fall in line by July 6 but major lenders like HDFC, AXIS, YES, ICICI and Kotak Mahindra Bank have jumped the gun and already slammed the door on crypto investors, traders and exchanges, leaving them dazed and dumbfounded.
With staggering losses staring it in the face, the industry has put the RBI in the dock by petitioning the Supreme Court and high courts in Delhi and Kolkata, saying the apex bank’s order to the banks to shut it out was ‘unfair, arbitrary and unconstitutional’, and should be withdrawn after seeing the other side of the coin.
The petitions which will be heard by the country’s highest court on July 20 have been filed by the Internet and Mobile Association of India (IMAI)--representing not only online and mobile value-added services industry but also cryptocurrency exchanges--as also by a group of 11 different representatives from various crypto-related businesses and four independent exchanges.
“Banking is an essential service which cannot be denied to investors if they are not doing anything illegal. The government has not declared virtual currencies as illegal,” argued accountant Jitendra Prajapati, an Ahmedabad-based bitcoin aficionado.
In a little relief, the Supreme Court, in response to IMAI’s plea, refused to stay the RBI circular but allowed cryptocurrency exchanges, their shareholders, traders and other individuals to present till May 24 their gravamina before the banking regulator which, it said, “will look into the issues in accordance with the law.”
On its part, the government wants to draft a Bill to crack down on the unregulated market to check illegal use of cryptos like bitcoin--now most widely supported among participating exchanges, wallets and payment companies--and other digital assets.
It has already sought the views of the financé ministry, the RBI, the Narcotics Control Bureau, the Enforcement Directorate, the Central Bureau of Investigation and the Income Tax Department only to find that departmental opinions are divided over the issue.
And with the RBI adding to the confusion by planning to launch its own digital currency, whether the cryptocurrencies will finally be regulated or strangulated is anybody’s guess.
Though the clouds of uncertainty are hanging over the exchanges which have invested heavily in their money-spinning business, they care tuppence for the RBI blockade and are not tossing in the towel but have found alternative ways for survival if cold cash trading is ruled out even as the bitcoin price hit Rs 579,285 (USD 8,515) on May 22.
Fully aware that there will be the devil to pay, Mumbai’s Zebpay, India’s largest cryptocurrency exchange, has switched its strategy and launched crypto-to-crypto trade on its platform, allowing customers to buy one cryptocurrency in exchange for another.
Some other players like multi-cryptocurrency exchange CoinRecoil being launched in Ahmedabad soon are also looking at other markets like Singapore, Estonia, Australia, Canada, Thailand, and Dubai, where, incidentally, the city authorities have introduced emCash, its own official encrypted blockchain technology-based digital currency.
Says CoilRecoil director Kunal Barchha: “Whenever a new technology is introduced in the market, it faces criticism and steps are taken to stop its growth; the same thing is happening with virtual currencies.”
In sum, bitcoin bashers may condemn it as ‘shitcoin’, ‘bubble’ or ‘mediocre coins from mediocre start-ups’ but the investors and traders are betting their bottom dollar that India will not miss the digital currency revolution and will soon recognize cryptocurrency as the ultimate futuristic currency even as new exchanges are sure to spring up in the days to come.