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India to decide fate of crypto entities within two weeks

Image result for bitcoinIn an ongoing case related to the banking ban of crypto-currency in India, the country’s top court has said that it will pass judgement with or without a response from the banking regulator Reserve Bank of India (RBI). While hearing the long-pending case on August 21, 2019, the Supreme Court (SC) has ordered the RBI to reply within 14 days justifying its action taken regarding crypto players in the country.

For the uninitiated, in a bid to protect the retail investors, the banking regulator in July last year had banned regulated entities such as banks and financial institutions from providing any kind of services to crypto-related businesses. The regulator feared that crypto trading would lead to tax evasion, financial frauds, and other money laundering activities.

However, since these entities (crypto) depended on the financial institutions for transactions, the RBI’s diktat had adversely affected their business thus forcing over a dozen of these players such as Zebpay, Koinex, and Unocoin to either shut shop or pivot their business models. This had also led to different PIL’s being filed at different courts across the country challenging the ban and other concerns related to the need for cryptocurrency trading. Besides, the IAMAI (Internet and Mobile Association of India), on behalf of cryptocurrency exchanges, had submitted a representation last year to RBI with a few recommendations to which the latter has not responded till yet.

Slamming the RBI for not responding to IAMAI’s recommendations, the SC questioned the regulator on why it has not responded to the representation and gave two weeks to come with a proper reply after which the court will finally pass a judgement.

While the RBI has agreed to the deadline, Nischal Shetty, Founder of P2P crypto-trading exchange WazirX, told IBS Intelligence that, “It will be interesting to watch RBI’s response to some of the  recommendations that suggest KYC (know your customer) and AML (anti-money laundering) as solutions to RBI’s fear of money laundering and investor protection.”

Shetty, who has launched a Twitter campaign against the banking ban for the last several months,  further added that the RBI would have to respond to these recommendations on why they do not agree that KYC and AML are good enough strategy to protect the investors. “If they don’t then the next question to ask them (RBI) is that how are the banking institutions currently preventing such instances with KYC and AML?” Shetty said.

India’s apex court is hearing the matter on whether cryptocurrencies such as Bitcoin, Ethereum and Litecoin amongst hundred others are legal and if they should be regulated for over two years now. Recently, the RBI in its recently framed policy for a regulatory sandbox has put cryptos in a negative list, meaning the players in that segment are not eligible to test their products or services indicating the regulator’s stance. India has joined the debate on cryptos at a time when the developed nations across the globe have also shown concerns on the issue while the crypto investor community burgeons.

According to a compilation by crypto-focused portal Cointelegraph, since 2016, several countries including China, Pakistan, and Egypt have either banned digital currencies altogether or have placed various legal impositions on this asset class. However, a few G-7 members including the United Kingdom and the United States along with Australia and Singapore have taken a middle-ground with a cautious approach and are reportedly in the process of creating a new cryptosystem that can help collect and share personal data associated with individuals who regularly make use of cryptocurrencies.

But some nations have accepted crypto as a new asset class. For example, Switzerland provides a lot of financial impetus (such as low tax rates, tax exemptions) to crypto startups looking to set up their operations. Its finance regulator classifies digital currencies as assets that need to be declared on one’s annual returns and are subject to the country’s existing wealth tax scheme, as per the Cointelegraph report.

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