RBI releases a circular, ‘curbing’ cryptocurrency.
Jaideep Reddy, an emerging leader at Nishith Desai associates, a law firm, believes that such an action on the part of the highest court in the country is guaranteed to drive the market underground. The circular restricts all associated banks from dealing in cryptocurrency and various other involved assets. But this action shall only accelerate the concerns of the bank regarding crypto-assets such as money laundering.
Mr. Reddy spoke in a panel discussion on ‘Way Forward for Indian Cryptocurrency Exchanges’ at the International Blockchain Congress, just this Saturday.
“From a policy perspective, if you look at what this step actually achieves is that it drives the whole market underground,” he says. He further goes on to say, “When you say that people cannot transact in this industry through proper channels, what you are actually saying is that you have to buy it in cash and sell it in cash and as a result, all concerns that the RBI has stated — money laundering, consumer protection and market integrity — the circular makes those concerns worse,” he exclaimed after claiming the article as prohibitive.
In a cash-intensive market, there is a higher probability of negligible records and a minimal probability of disclosing revenue. In contradiction with an open market, he exclaimed banking channels with customers require vigilance wherein authorities can analyse exchanges which are taxable. He had an opinion that a more organised approach such as having strict policies regarding KYC when dealing with a customer could have been adopted.
According to Unocoin co-founder Sathvik Swaminathan, while cryptocurrency exchanges utilize methods of address verification such as Aadhar among others, it becomes tremendously challenging to determine whether the cash utilised in these transactions is accounted for. “Some of the exchanges have a policy in which, if the user exceeds an ‘X’ amount of rupees, or bitcoin, then they will want to have an additional set of verification documents so that they know that the person is a high value, high risk customer. You will know what they want to do,” he exclaimed.
Keeping themselves open to queries from the audience, panelists which included Koinex co-founder, Rahul Raj and the Chief Executive Officer of Zebpay, Ajeet Khurana, made claims that the cryptocurrency is not an official form of currency as per the government of India. The law only classifies and limits the currency to notes, coins and other promissory banknotes. In accordance with their claims, cryptocurrency is not a derivative and is analogous to gold, silver and other precious metals whose behaviour is more resembling of assets.