Indian banks and other players are taking a cautious approach in response to regulatory uncertainties surrounding the country’s cryptocurrency industry. Many Indian institutions continue to cite a circular from the Reserve Bank of India (RBI) that prohibits banks from dealing in cryptocurrency, even after the Supreme Court abolished the ban in March 2020. This has prompted the central bank to clarify the legitimacy of the circular in light of the court’s ruling.
Rameesh Kailasam, CEO of IndiaTech.org, an organization representing India’s consumer internet startups, unicorns, and investors, emphasizes the importance of a clearly articulated regulatory framework for the cryptocurrency industry in India. IndiaTech.org has recently released a whitepaper proposing a five-point legislative framework to regulate the industry, aiming to limit risks while promoting growth and innovation.
Rameesh points out that Indian entrepreneurs receive only 0.2 percent of global investments in the blockchain sector, despite the presence of over 300 blockchain businesses worldwide. He believes that regulators should not discourage innovation and investment, but rather catch up with the industry’s advancements. Rameesh envisions India becoming a hub for blockchain innovation, with a comparable impact on the economy as IT services and the internet economy.
According to Rameesh, the first step towards realizing this potential is to accept cryptocurrencies and classify them as digital assets rather than currency. Other steps include establishing self-regulation or a code of conduct for the industry, implementing checks and balances for traceability and disclosures, formulating tax regulations, registering local crypto exchanges, and promoting innovation and growth.
During an interview, Rameesh outlined a five-point framework to enhance crypto acceptance and blockchain innovation in India. The framework includes taxation measures that treat crypto assets similarly to other assets and require disclosure of holdings. It also emphasizes self-regulation aligned with financial stability and consumer protection goals, defining crypto assets as digital assets, implementing compliance and reporting measures to counter suspicious activity, and addressing payment and token concerns to protect investors.
IndiaTech.org’s proposals come at a time when authorities are catching up with blockchain innovation and crypto acceptance. Despite the Supreme Court’s ruling, banks have continued to rely on the 2018 RBI circular to sever ties with crypto exchanges and discourage customers from trading in cryptocurrency. The industry views the RBI’s clarification as a positive step towards the future of the industry.