The crypto regulatory environment in India remains uncertain despite the supreme court overturning an earlier central bank ban. The Reserve Bank of India (RBI) continues to advocate banning crypto, comparing virtual assets to Ponzi schemes. At the same time, the Indian crypto community has been calling for balanced regulations even as the government fails to introduce a crypto bill in parliament.
Keypoints
- The Indian government issued a notice against several offshore crypto exchanges for operating illegally without registering as a “reporting entity”. This led Apple to block apps like Binance, KuCoin, and Huobi in India.
- The Indian crypto community has been calling for balanced regulations, but the government has yet to introduce a crypto bill in parliament despite reassurances.
- After India imposed high crypto taxes last year, volume plunged and users flocked to foreign exchanges. The latest app blocks aim to stop this.
- Major Indian exchanges like CoinDCX have encouraged users to transfer assets back to India-based platforms through rewards programs.
- The regulatory environment in India remains uncertain. While the Supreme Court overturned an earlier RBI crypto ban, the central bank continues to compare crypto to Ponzi schemes.
This conflicting landscape has led to messy policymaking. Last year, without a regulatory framework in place, India shocked markets by imposing a 30% tax on crypto gains plus a 1% deduction on transactions. The moves triggered plummeting trade volumes as users rushed to offshore exchanges not subject to the heavy taxes.
Now the Indian government is scrambling to contain the fallout. The Finance Ministry’s Financial Intelligence Unit (FIU) recently issued notices against several foreign crypto exchanges including Binance, KuCoin and Huobi for operating illegally without registering as a “reporting entity” per anti-money laundering rules.
[Community Update] Amidst the changing landscape of Indian VDA, where offshore exchange apps are now facing restrictions due to government directives, CoinDCX acknowledges the community’s apprehensions. This is a defining moment for VDA in India, and we’re dedicated to… pic.twitter.com/uTpxGqsHk0
— Sumit Gupta (CoinDCX) (@smtgpt) January 10, 2024
The FIU requested tech authorities block access to these non-compliant offshore platforms. While websites remain available, Apple has preemptively banned apps like Binance and Kraken from its India app store. The Google Play store still lists them.
The on-again off-again attempts to strictly regulate India’s crypto ecosystem keeps markets on edge. Domestic exchanges that adhere to strict know-your-customer rules have tried convincing authorities that poorly-conceived policies drive users towards risky decentralized platforms.
Leading India-based trading platforms like CoinDCX have encouraged customers to transfer funds out of foreign exchanges and back onto compliant domestic alternatives, even offering financial rewards for shifting assets. But the lure of pseudo-anonymity and avoiding tax obligations will likely see many Indians continue accessing blocked exchanges through VPN workarounds.
For now, the centers of power in Delhi seem aligned that tough rules need to govern cryptocurrency trading — even if there’s little agreement on what those rules should be. How this tension between clamping down on crypto and fostering innovation gets resolved will shape the landscape for Bitcoin and other digital assets across South Asia for years to come.
