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A recent survey on crypto by the Times of India has expressed a can-do attitude towards non-fiat currencies. The article champions the idea of using cryptocurrency, saying “many are now realizing its sheer potential in use-cases such as cross-border trade and global financial inclusion.” Current statistical figures have backed up the arguments of the piece.
According to some polls, India boasts more than 1.5 million BTC users, with an influx of 200,000 users each month. But the government is holding back on fully legitimizing crypto and is keeping its options open. Unlike high-tech Japan, crypto-friendly Switzerland and forward-thinking Singapore, India suffers due to lack of technical specialists that can make crypto work for the benefit of the national economy and the people. Despite the banking restrictions put in place by the Reserve Bank of India (RBI) this April, India is still on the list of countries in which Bitcoin is legal, as opposed to Egypt, China, Vietnam and others.
The RBI banned Indian banks from providing services to crypto-related individuals and businesses back in August, and the worst was yet to come. Local news outlet Inc42 reported that the Minister of State for Finance, Anurag Thakur, recently spoke out against crypto during a meeting in the upper house of the Indian legislature.
Thakur stated,
“Presently, there is no separate law for dealing with issues relating to cryptocurrencies.”
Hence, all concerned departments and law enforcement agencies, such as RBI, Enforcement Directorate and Income Tax authorities, etc. take action as per the relevant existing laws.
The Indian government inter-ministerial committee (IMC) is strongly opposed to “cryptocurrencies created by non-sovereigns.” BTC will have rain clouds on the horizon if the “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” draft picks up steam. If the recommendations in the bill are born out, anyone who “mines, generates, holds, sells, transfers, disposes of, issues or deals in cryptocurrencies” will face a 10-year prison sentence.
Is Bitcoin Mining Legal in India?
Despite a future that is very much up-in-the-air, mining BTC in India is still possible, but it’s only profitable if it is done on a large scale with access to cheap electricity. ?ccording to BitcoinBlockHalf, 17,997,150 BTC, 85.7% of the total number, have already been mined. With an inalterable total of 21 million, there are just 3 million BTC left and the 2020 halving is set to further reduce mining profits. After the halving, the reward will be cut from 12.5 to 6.25 coins, which means the clock is ticking for miners.
Bitcoin statistics prove the issue is not that mining BTC is illegal, but rather that mining costs a fortune. With an estimated current price tag of more than ?500,000 ($7,000) a year, due to hardware and electricity costs, only those who think that their gains will outweigh their losses tend to set out down the mining path. Additionally, because the regulatory future of BTC processing is so uncertain in the country, miners considering investing in costly mining rigs have to take into account the possibility that they could lose it all should it be declared illegal.
How to Buy, Store and Spend Crypto in India
Trying to find the best Bitcoin exchange in India, you’re sure to come across Zebpay: trusted, reputed, secure – and unavailable. In fact, Zebpay, which was the most frequently used exchange in India, is not accepting new registrations. Before the RBI restricted its services, Zebpay shut down, forcing locals to turn to a number of alternatives. Due to the current RBI restrictions, the P2P model has become the most prevalent in India, as you can see with the following:
Bitbns Exchange
This pioneering exchange, founded by IIT graduates in 2017, has established a reputation for itself as an innovative P2P cryptocurrency exchange. The Bitbns engine finds a match withdrawer who has placed a request equivalent to a deposit already in the system. To enact a transaction, a depositor will need to get a reference code, use it and confirm receiving INR.
LocalBitcoins Exchange
To use the service, a user selects an advertisement from a buyer or a seller and then proceeds to conduct a transaction at his own risk. The well-established crypto exchange only enables BTC transactions with the following payment options:
- Cash
- NEFT
- IMPS
- PayTm etc.
WazirX Exchange
This digital exchange facilitates the trading of cryptocurrencies with fiat. Here is a sneak peek into the process: a user sends funds to a seller’s bank account, which are held until the seller confirms the payment, at which point WazirX releases the locked fiat and the seller sends BTC to the user.
Local Ethereum Exchange
To quench your thirst for crypto on this exchange, you can buy crypto from a list of sellers and sell coins to a list of buyers using the following payment methods:
- NEFT
- IMPS
- UPI
- PayTm
Is Trading Bitcoin Legal in India?
There are several existing laws in India that are applicable to crypto, besides the above mentioned RBI interdiction. Some tokens that are “issued by an identifiable issuer and backed by the underlying assets of the issuer,” fall under the Securities Contracts Act of 1956. The Securities and Exchange Board of India (SEBI) regulates the type of crypto that can be identified as a collective investment scheme. A new Cambridge University report on the regulatory landscape in India has brought to light the precarious position many Indian crypto projects find themselves in, particularly in regards to the Companies Act of 2013 and the Payments and Settlements Systems Act of 2007 (PSSA).
The infamous threat of 10 years imprisonment comes from the Prevention of Money Laundering Act of 2002 (PMLA). The report clarifies,
“However, it is unclear whether the reporting obligations prescribed under Chapter IV of the PMLA extend to wallet operators, crypto asset exchanges or third-party Bitcoin services.”
Tough luck for ICOs – initial coin offerings are prohibited as unregulated deposits by the Banning of Unregulated Deposit Schemes Bill of 2018 unless the issuers ensure they are outside the purview of the ordinance.
Top Blockchain Businesses in India
India is known as a hot pit of many tech-savvy entrepreneurs that are both employed by big-name companies and run their own blockchain-based companies.
A good example is Debut Infotech, a full-service blockchain development company that has done some great stuff for KFC, Disney, Suzuki etc. The company renders services with smart contracts, proof of concept (PoC), Hyperledger Fabric, DApps, blockchain consultancy and advisory.
SoluLab is a mobile and web development company that works along similar lines. The team develops digital wallets, exchange platforms and advanced data storage systems. SoluLab works closely with American banks and has offices in NY, LA and UAE.
According to a World Bank report, India is the worldwide leader of remittances received. Despite an 8.9% drop in 2016, Bitcoin has been widely used in India for remittances and compensating freelancers. Many Bitcoin startups in India believe remittances are a huge potential market for them, as Bitcoin transactions are more economical than wire transfers. Guess who has the biggest slice of the cake? Over 15% of the remittance market belongs to Federal Bank, a private sector federal bank that has launched a blockchain technology-based business. It provides non-resident Indians (NRIs) in the UAE with instant money transfers via Ripple’s incorporated network. You see, not all Indian banks are as mean as RBI.
The Prospects of the Crypto Industry in India
What does the future hold for crypto in India? Currently, about 5 million Indians who own crypto and 20 thousand blockchain developers, YouTubers and influencers feel uneasy with the sword of crypto criminalization hanging over them.
Things have gotten more complicated because of a major disagreement between law enforcement and the reserve bank. Recently the RBI froze cryptocurrency assets worth $1.2 million tied to the Gain Bitcoin case in view of petitions filed in the Supreme Court. Then, last year the money was seized by the Pune cybercrime police and transferred to a contracting company called Discidium Internet. Then the RBI froze Discidium Internet’s account but in its reply to a court notice from September 17, it denied doing so, according to a report by the Times of India. This is evidence of the fact that government entities can’t agree upon their attitude towards crypto.
As it stands now, India is fully capable of integrating cutting edge, blockchain-based services. But the escalation of legal conflicts might result in India being deprived of distributed ledger technology. As the state tightens the screws on what was once a prospective source of tax revenue, blockchain entrepreneurs are fleeing abroad where they can register their businesses safely.
Understandably, the Indian government is concerned that funds are being siphoned off by a shadow economy. But the way to retrieve these funds is not by further cementing crypto’s place in the shadow economy. This time around, the Indian government should consider heeding the old adage and joining the trend because they definitely can’t defeat it.
If you have gotten this far, be sure to check out my previous installments of the running Crypto Geography series. The piece about Mexico examines the cat-and-mouse game between crypto entrepreneurs and regulators. The UK article dwells upon the legal status of Bitcoin, crypto business authorization and more. As for the US, I have three articles that will tell you which states are crypto friendly, fill you in on BTC’s legal status in America and how the US foreign crypto-policy influences other countries.
Solomon Brown, head of PR at Freewallet
Solomon has a wide background in crypto and blockchain technologies. After promoting several blockchain startups, Solomon started his tenure with Freewallet in 2018, firstly as a PR manager, before moving to his current position as head of the PR department.
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