Trading of Cryptocurrency in India: Legal- Impact On Investment Market

Trading of Cryptocurrency in India: Legal- Impact On Investment Market

The Supreme Court on 4th March 2020 struck down the curb on cryptocurrency trade in India. The report stated that the curb on crypto currency trade is illegal while adding that the order lifted ban on trading in virtual currency, cryptocurrency and bitcoins. The Reserve Bank of India had virtually banned cryptocurrency trading in India as in a circular issued on April 6, 2018, it directed that all entities regulated by it shall not deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling those. The April 6 circular was later challenged in the top court.

India’s virtual currency industry had come to a standstill following the April 2018 notification that prohibited use of banking channels for transactions of cryptocurrencies such as Bitcoin. Several exchanges shifted overseas or closed their business altogether in the last two years. “When a regulator like RBI bans, the market closes down. Six months back, we pivoted from crypto to blockchain, as we had to sustain. No investor was ready to back us amid the uncertainty of regulations,” said Wilson Bright, CEO of BlockSurvey. The supreme

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There are currently 1.7 million virtual currency users in India and this takes 2-10% share of the overall market. Investors say peer to peer (P2P) companies will see inflow of capital, similar to what has been happening globally. Most crypto founders, investors and industry bodies think that the order would open up more avenues for a cryptocurrency ecosystem to be built. Bankers have said that the regulator would now have a nuanced understanding of crypto technology and would regulate it in a manner that encourages innovation.

The Way Ahead?

What is the current attitude in the financial sector towards the adoption of these new technologies? And, most importantly, should one push for broad acceptance and deployment, or do they need to stabilize first?

According to Kevin Werbach, (Wharton professor of legal studies and business ethics), “It’s not an either-or” choice. Cryptocurrencies and blockchain technology in general, he noted, are immature currently. However, there are some areas where they are already able to be deployed effectively. The best way to work through today’s problems, is “to build working systems and see where difficulties arise,” Werbach said. Looking ahead, integration with law, regulation and governance will be critical. Blockchain and cryptocurrencies represent a new form of trust, he added. They will only succeed if they become sufficiently trustworthy, beyond the basic security of the distributed ledgers. “Law, regulation and governance are three major mechanisms to produce trustworthy systems that scale up to society-wide adoption. We need to find ways to address the legitimate concerns of governments without overly restricting the innovations that blockchain technology enables. I’m optimistic about that process over time.”

Over the next few years, many more companies will probably implement private blockchains to improve the transparency and traceability of their financial operations, supply chains, inventory management systems and other internal business systems. Clearer standards will be adopted and a number of high-profile projects will emerge.

Cedrus Wealth Partners

Pune, Maharastra.

www.cedruswealth.com