India's Regulatory Journey summarised and the role of Supreme Court in it.

Published 19 Jul 2021 by Radhika Aggarwal

Table of Content

  1. What does Cryptocurrency mean?
  2. Timeline of Cryptocurrency in India
  3. Conclusion

For about more than two years Indian courts have been fighting to lift the ban of cryptocurrency in India. After going through lots of ups and downs the supreme court has put a lot of effort into lifting the ban of cryptocurrency in India including bitcoin. The country India is like a sleeping giant having the power to change the economy and make the customers move towards digital payments. Do you have the curiosity to know more about cryptocurrency and how did it start its journey in India after the supreme court decision?

What does Cryptocurrency mean?

Cryptocurrency is a digital currency that serves as a medium of exchange for purchasing goods and services online. Most of the cryptocurrencies are distributed, blockchain-based networks, that are operated digitally. The word crypto-currency is derived from the methods generally used to protect networks. It is always free from government regulations and has become very common. After the supreme court has lifted the cryptocurrencies in India NASSCOM tweeted that:

“We welcome the Supreme Court’s decision to lift RBI’s ban on trading in cryptocurrency. We believe that banning tech is not the solution, and a risk-based framework must be developed to regulate and monitor cryptocurrencies and tokens”.

Let us now discuss the journey of Cryptocurrency in India and how it made its place in the digital world.

Timeline of Cryptocurrency in India

Let us here discuss the journey of cryptocurrency in India. Although the journey began 13 years ago in the year 2008. The population of India is around 1.37 billion out of which 40% of the population use internet services and have a lot of knowledge related to crypto. Read the complete article to know more.

  • In 2008, it began when a paper named bitcoin became a point-to-point electronic cash system published by the name of Satoshi Nakamoto. Meanwhile from the year 2008 to 2010, the process of bitcoin was going on so that people start using it as a medium of exchange.
  • In the year 2011, there were many cryptocurrencies that turned up such as Litecoin, Namecoin, and Swiftcoin. When bitcoin was introduced in the market these all were criticized. After few years, around 5 years later, there was a sudden rise in the number of transactions. The value of bitcoin that was $5 in 2012 reached $1000 by the end of 2017. In between these 5 years, many cryptocurrencies operated in India on the common exchange platforms like Zebpay, Coinsecure, Btcxindia, Koinex, Bitxoxo, etc.
  • After the Prime Minister of India Narendra Modi announced the demonetization program on 8 of November in 2016 the people of India were puzzled and desired to have a new way to keep their capital. At that time the demand for bitcoin increased, becoming the standard price. Just after the demonetization program, the demand for cryptocurrency rose, becoming the source for people to keep their capital. According to the population of India, it contributed only 2% of the overall global blockchain industry capitalizing. When Narendra Modi did demonetization price of bitcoin in India traded almost around 100000/- While the international price was around 60000/- Bitcoin was almost being sold at a 50% Premium and people still bought them.
  • In November 2017, there was a high-level committee in which Shri Subhash Chandra Garg, Director, Department of Economic Affairs, Ministry of Finance, and Shri Ajay Prakash Sawhney Shri Ajay Tyagi, Shri B.P, the Government of India decided to find out problems related to virtual currencies.
  • On 1 February 2018, Arun Jaitley, India’s finance minister, said that cryptocurrencies cannot be used as a payment system as it is not a legal tender. The Reserve Bank of India circulated an instruction on 6 April 2018 to all commercial and cooperative banks, payment institutions, small financial institutions, NBFCs, and payment system providers that there should not be any trading done with virtual currencies. They also said that they cannot accept bitcoin and other cryptocurrencies as a currency because they are not made of metal or reside in intangible shape, nor were they stamped by the government.
  • On 15 May 2018, a written petition was submitted to the supreme court by the members of the Internet and Mobile Association of India (IMAI) entitled The Internet and Mobile Association of India v. Reserve Bank of India.
  • In 2019, the committee said that there should be a ban on private cryptocurrencies.
  • On 4 March 2020, The Supreme Court lifted the ban that was imposed in the year 2018 which prohibited its regulated entities, such as banks, from trading in or facilitating banking transactions in virtual currency (VC). After seven months the order of the courts came announcing the introduction of cryptocurrencies in the whole region.
  • Justices Rohinton Nariman, Aniruddha Bose and V. Ramasubramanian keeping the RBI circular aside said, “ The impugned rule can not be considered to be proportionate”. In the order, it was written that “But the trade-in VCs and the working of VC exchanges are sent by the impugned circular to comatose by disconnecting their lifeline namely, the link with the normal banking system”. It was also quoted by the top court that, “When the consistent stand of RBI is that they have not banned virtual currencies and when the government of India is unable to take a call despite several committees coming up with several proposals, including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate”. In the last Zac Cheah, CEO, Pundi X quoted that,” Move will give birth to a lot of start-ups in India”.
  • On 29 January 2021, the price of the bitcoin rise 20% after Elon Musk, wrote #Bitcoin on his Twitter account. He also added another tweet saying,” In retrospect, it was inevitable”. Elon Musk’s addition of bitcoin to his Twitter profile made people think about whether the Tesla CEO will buy bitcoin or add the cryptocurrency to his electric car firm’s balance sheet. The boss of Micro Strategy Michael Saylor said that, If you want to do your shareholders a $100 billion favor, convert the $TSLA balance sheet from USD to #BTC”. In return, Musk replied that “Are such large transactions even possible?”
  • On 14 February 2021, India proposed a law in which there will be a ban on cryptocurrencies, and fines will be imposed on those trading in the country or even holding any such type of assets. Despite having a ban on cryptocurrency the price of bitcoin is increasing day by day and the number of investors also increased holding around 100 billion rupees in this industry. One of the crypto investors said, “The money is multiplying rapidly every month and you don’t want to be sitting on the sidelines”. “Even though people are panicking due to the potential ban, greed is driving these choices.”
  • Soon after the above statement, Elon Musk, the owner of Tesla an electric car making company $1.5 Billion in bitcoin and decided to accept it as payment. Elon Musk tweeted regarding the increment in the prices of cryptocurrencies such as Bitcoin and Dogecoin so that it will encourage people to buy more digital currency. He said in his chat on Twitter that, “I do at this point think bitcoin is a good thing, and I am a supporter of bitcoin.”
  • On 14 March 2021, Union Finance Minister Nirmala Shitaraman said that India will not close all options when it comes to cryptocurrency or blockchain. She also quoted few lines when she said to the director of India today, “My view on this is that of course, the Supreme Court had commented on cryptocurrency and while the RBI may take a call on official cryptocurrency but from our side, we are very clear that we are not shutting off all options”. Recently the governor of the Reserve Bank of India (RBI) said that the bank has some major issues over the impact of cryptocurrencies and it will soon going to launch its own digital currency that remained a “work in progress”.

Conclusion

According to Abhishek Bourai, founder of cryptocurrency exchange CXIHub, despite the RBI warnings in 2018 Indians never stopped trading cryptocurrencies completely. The lack of regulation, however, has prevented numerous initiatives from progressing:

“International investors are wary of investing in a blockchain company that is incorporated in India. This is why we are taking our business to a more crypto-friendly jurisdiction and bring our trading and B2B services to the market”

Concluding this whole article, we at cxihub.com offer to trade, store & transact in a number of cryptocurrencies like Bitcoin, Litecoin, Ethereum, Dogecoin & many more Against INR, BTC & USD. To know more about the crypto industry do read our blogs posted at our official website cxihub.com.

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