Regulation and new legislative changes to how cryptocurrency is being used and/or being perceived in different countries all around the world is important in understanding cryptocurrency adoption. In this article, which is the first in a series of country insights, we take a look at the state of cryptocurrency in India and how changing legislation is favoring the adoption of P2P trading.
Cryptocurrency and its legislation in India has been a topic covered widely over the past year, with more and more voices joining the conversation. The central bank in India (RBI) imposed a ban on all financial institutions dealing with cryptocurrency settlements, such as exchanges, as a precautionary measure in a press release. The largest centralized exchange in Indian at that time, Zebpay, closed its doors as a result and relocated to Malta, considered one of the worlds cryptocurrency hotspots.
The basic principle of cryptocurrency is that it is trustless and based on protocol. It is here to disrupt the old system by offering people an alternative and choice to opt out of the current financial model of fiat cash should they wish. Whilst adoption still has a long way to go, the numerous cryptocurrencies out there have gained attention and media spotlight for both good and bad reasons. India has always been a country of innovation and adoption so it is no surprise to see the eagerness in learning and building within the new technological space taking root.
The reason for the banking ban in India, outlined in the press release given by RIB, is due to the negative potential surrounding cryptocurrency. It is also not unreasonable to assume, taking into consideration we are talking about a trustless system of cash and decentralized technology applications, there is a potential fear of losing control.
This is because cryptocurrency is setting up to remove that system of trust (centralized banking systems). Before allowing the financial systems in place to interact with cryptocurrency the RIB needs to fully ascertain what risks there are and determine how best to handle customer obligations amidst a Governmental stand that has not been verified.
The opening statement in section 13 of the press release on the matter was not particularly negative but continues on with a warning and wariness to its application and use by bad actors. It begins:
“Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system.”
It then goes on to say...
“Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs.”
The Indian Governments Stance
The Indian Government has so far only stated that they do not accept cryptocurrency as legal tender. To the government, cryptocurrency is simply not money. An outright ban on the use of cryptocurrency and declaration of illegal status has not been given but the clarity of regulation needs to be addressed. A final decision and stance was due to be released by the end of 2018 but was sadly not forthcoming with the Supreme Court demanding an answer by October 2018 which it missed. This has continued to hamper and hold up legal proceedings within the country for large FinTech companies who need the guidelines on how to proceed in conducting their business operations.
For the 1.3 billion Indians under government rule, however, this has not stopped interest in cryptocurrency. The current banking ban fueling media interest has sparked a lot of discussions. Indian Fintech companies are concerned with India's current regulatory ambiguity and worry the country is being held back from joining in with the rest of the world in the adoption of blockchain technology and cryptocurrency innovations.
Cryptocurrency Support Going Viral
With so many undeterred, there have now been reports of financial institutions obliging customers to sign a waiver, that explicitly states that the customer will not deal in cryptocurrency with their accounts. The image of the statement soon went viral with two influential accounts on twitter @DesiCryptoHodlr and cryptocurrency advocate, @Apompliano, sharing the news to the world.
The reality is that cryptocurrency turns 1.3 billion Indians into their own bank via a mobile phone and an internet connection. It gives every Indian a store of value and means they have the ability to easily trade across borders. It offers privacy and independence from a centralized fiat system, this is always going to get a lot of attention going forward.
Twitter alongside Reddit is a huge resource for the cryptocurrency community as a whole. The hashtag #IndiaWantsCrypto is now becoming a key search term for opening the dialogue between people and state. Another hashtag of importance within the Indian crypto community is #IndiaCrypto. As regulatory debates continue, both social media accounts and posts are only going to grow in number with already key influencers in the space becoming a distinguished voice for calls to clarity as well as protest.
Is the Future P2P?
India was an early adopter of Bitcoin, the first and foremost cryptocurrency to many which started it all. So much so the RIB was issuing warnings as early as 2013 to Indian citizens. At the time of writing, however, clarity is remaining elusive for regulations and the status of cryptocurrency. If this indecisiveness continues to propagate, Indian Fintech companies and startups might have no other choice but to relocate operations temporarily out of the country. Relocation of innovative Indian companies could potentially stifle years of progress and change, keeping the Indian people out of step with the rest of the world but not by their own choice.
In the meanwhile, many people in India have been moving towards peer-to-peer (P2P) trading (Otherwise known as OTC trading). Centralized exchanges are tied to the same banks that are rejecting cryptocurrency for their fiat deposits and withdrawals. P2P trading doesn't have this problem as you are trading directly with other people which means payment can be made directly to the other person’s bank account without the platform acting as an intermediary. P2P trading also makes it more difficult for the banks to know that the buying or selling of Cryptocurrency has even taken place. LocalCoinSwap in this regard is a natural place to help people buy and sell Bitcoin in India, or any of our other 20+ cryptocurrencies, either due to a difficulty of accessing centralized exchanges or simply because they prefer to buy and sell Bitcoin privately or on a less centralised platform.
If you wish to learn more about LocalCoinSwap or even P2P trading, you can read our recent post how to make money with P2P trading.
This article is an editorial opinion piece contributed by an LCS community member.