Will India Govt Ban Cryptocurrencies From Its Payments System
The last couple of days had been a roller coaster ride for cryptocurrencies across the world. While China blocked its crypto exchanges, the US banks are reducing their cryptocurrency purchases. Meanwhile, at the Union Budget last week, India’s finance minister Arun Jaitley, stated that the country does not recognize bitcoin as legal tender and that the government would take measures to penalize crypto payments. Shortly after the FM’s statement, the price of bitcoin fell to a two-month low of less than $7,000. It also left India’s crypto community and investors in a huff. The statement has again raised doubts on cryptocurrency’s legitimacy of trading, leaving scope for much heated debates and discussions in this area.
Offering greater clarity
Post the budget announcement, secretary of economic affairs SC Garg said that the government will set up a panel to examine trading of crypto assets in unregulated exchanges. The panel is expected to submit its findings in a report by the end of March 2018.
Ajeet Khurana, head of the Blockchain and Cryptocurrency Committee (BACC) of Internet and Mobile Association of India (IAMAI) is one among the many people in India working towards spreading awareness on cryptocurrency in India. Following the finance minister’s comments, Khurana said in a statement that he is happy that cryptocurrency at least found a mention in this year’s budget.
Even though there was widespread media to coverage indicate that the Finance Minister had stated that cryptocurrency was illegal, Khurana clarified in an interview that there has been no indication by the government that it is banning exchanges. “…neither does it stop people from holding a cryptocurrency. It is just saying that the government doesn’t recognise cryptocurrency as money, which no country in the world does except Japan It doesn’t mean crypto trading is illegal, but comes with its own risks like any other investment asset in the market,” he stated.
Need for education, awareness
The knee-jerk reaction to the minister’s statement and the consequent fall in bitcoin prices could be attributed to a lack of awareness about bitcoin itself. “Right now, the general understanding of the term bitcoin in India is vague. There are a lot of people in India who are intrigued by the technology but don’t understand it well enough,” said Khurana.
Regardless, India’s cryptocurrency trading volumes have been on the rise. While there are no official figures, Khurana said there are at least five million active traders in India, transacting via regulated banking channels.
Moreover, with India’s leading cryptocurrency exchanges such as Zebpay, Unocoin, Coinsecure, Coinome and Bitxoxo among others reporting a marked increase in user interest every day, IAMAI has been focusing on increasing user awareness outreach programmes such as educational videos and reading material, becoming one of the first industry bodies in the world to do so, said Khurana.
In addition, IAMAI is also working on putting together an online course using input from industry experts and bitcoin exchanges as well as developing a self-assessment test. “There are multiple dimensions to bitcoin such as the technology, security and privacy. It is important to be aware of every aspect, to understand bitcoin better and make informed decisions while trading,” added Khurana.
Advocating legitimate Cryptocurrency adoption
As a step ahead towards promoting industry collaboration, The Digital and Blockchain Foundation of India (DABFI) and the IAMAI merged in December 2017 to popularize blockchain technologies in India and build an advocacy platform. The Blockchain Foundation of India (BFI) is a community effort to promote the growth of blockchain-based initiatives in India and also connect all blockchain-based startups and their CXOs, government bodies, blockchain enthusiasts at one single platform to inspire, participate and collaborate in each other’s success in this growing industry.
Several major bitcoin exchanges in India such as Unocoin, Velix.ID, Zebpay and Coinsecure – also founding members of DABFI – are now part of IAMAI’s Fintech Council. Sandeep Goenka, cofounder of Zebpay and head of the newly formed fintech council said, “The current government is open-minded and this is a welcome change for those developing revolutionary technology. The most ideal way to strengthen the system is by using approved banking channels to onboard new customers and legitimize bitcoin trading. The largest bitcoin exchanges in India are already implementing these measures, and they should be standard practice.”
Manav Singhal from Velix.ID said, “Blockchain is the future of technology itself. We have a lot of talent working with blockchain in India; what we truly needed was a platform to collaborate and encourage. Through the BFI platform, we will be able to accelerate the growth of blockchain technology in India remarkably.”
Strengthening security practices
Sunil Sharma, Managing Director Sales for Sophos India & SAARC raised the security factor strongly. “With the rise in bitcoin’s popularity and a strong warning to act with “extreme caution” and understand the significant risks of choosing to invest in cryptocurrencies, it’s no wonder 2018 budget has a special emphasis on taking measures to stop cryptocurrency circulation and explore the usage of Blockchain technology.
He added that Cryptocurrency is popular with cybercrooks and usually cryptocurrency is the end, rather than the means of the crime, for example, when crooks infect your computer with coinmining software to hijack your CPU to earn money, or scramble your data with ransomware and demand that you pay them in cryptocoins to get it back.”
Despite these challenges, Bitcoins are here to stay. Already several banks in India have started experimenting with the new tech. ICICI Bank, Axis Bank, YES Bank, and Kotak Mahindra Bank are using it in areas such as international trade finance and vendor financing. In India, 56 percent of companies surveyed by research firm PwC said blockchain is part of innovation strategy, though not many may have implemented it. The PwC Survey counts the most common uses as those for fund transfers, digital identity and payments infrastructure.
In the words of Girish BVS, Senior Solutions Architect, Technology Group, Sasken Technologies, ”While we have to wait and watch how the cryptocurrencies’ future will unfold, the underlying blockchain technology provides a foundation for innovation in different verticals and use-cases with far-reaching effects. It is likely to become disruptive that has enormous potential for next level of automation, integration and service availability across many different verticals bringing in speed, efficiency and transparency.
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