Crypto-tokens: The future of Indian Crypto-Finance

The Government of India is considering launching Crypto tokens for financial transactions in the country, even as the existing ban on cryptocurrency is likely to continue. “Crypto token operate in a closed system and doesn’t impact the country’s monetary policy unlike cryptocurrency, which interferes with the money supply situation. Many governments in the world are considering using crypto tokens,” said Alok Mittal of Digital Lender’s Association of India (DLAI) president Alok Mittal.

Sources familiar with the matter told the news outlet that a committee has been set up by the finance ministry, under the chairmanship of the Department of economic affairs (DEA) secretary, and is reportedly working on a set of regulations and roadmap to allow certain crypto assets to be used in India. Once the draft regulations are ready and legally vetted, it will be tabled before the Parliament.

DEA secretary Subhash Chandra Garg, who is heading the committee, is quoted by DNA as saying: “The committee is studying the possibility of using cryptocurrencies or crypto technology (distributed ledger technology) for financial transactions and also what kind of regulations are needed for that…[while] the currency is totally banned, the committee is discussing its other uses and how it can be mainstreamed in India.”

Moreover, DNA India explained that unlike cryptocurrency, blockchain-based Crypto tokens are a “representation of money” and “can’t be used in place of Fiat money”

“The committee is examining if crypto tokens can be used to replace smart cards such as metro cards in the public sector to start with. Similarly, in the private sector, it can be used in loyalty programmes such as air miles where its use is limited to buying the next ticket and can’t be converted into money,” said a senior official in the ministry.

India’s stance on crypto

The Reserve Bank of India (RBI) had in April directed all the banks to stop dealing with individuals and businesses dealing in virtual currencies from July 5.

“The banking regulator has come out with regulations. It has debarred the banks from dealing with anybody or any aspect of cryptocurrencies. We don’t believe the cryptocurrencies to be currencies at all. We have issued several advisories for people to not deal with it. Because it is risky, it’s a Ponzi kind of scheme. Therefore, cryptocurrencies are banned in this country,” said Garg.

A senior official explained that users will need to pay physical money to buy a crypto token, which could be stored as a code in mobile phones. Crypto tokens are easy to implement from a technology and regulatory point of view, unlike cryptocurrencies, the official added.

A panel set up in December 2017 under the secretary in the department of economic affairs Subhash Chandra Garg to suggest regulations on cryptocurrencies was expected to submit its proposal by July. However, that looks difficult now according to a senior government official privy to the panel’s discussion.

Why hasn’t crypto caught on in India?

While digital currencies are set to be the future of financial payments due to their relative ease in cross-border transactions, their imminent lack of regulation has led to misuse of the currently available cryptocurrencies. Besides, extremely volatile movements have made them unsuitable as a store of value too. Thus, the RBI and other central banks have been coming down hard on the usage of these currencies.

The Cryptocurrency community in India also had to battle an onslaught of crimes and scams which has tainted the public perception of Cryptocurrencies. The most prominent scam began unraveling in 2017 after Amith Bhardwaj, founder of Cryptocurrency firm Gainbitcoin was accused by investors of frauds amounting to $300million. This case also gained prominent media attention due to the involvement of celebrities including British businessman Raj Kundra.

A significant number of local exchanges have either closed shop or partly ceased their operation already : BTCXIndia and ETHEXIndia were the first victims who chose to shut down back in March when the RBI ban hadn’t been announced yet. BTCXIndia cited the “discouraging cryptocurrency trading” of the Indian Government as the primary reason for closure at the time.

“This is a difficult subject, involving technology which is changing every now and then. That’s why it is taking some time,” Garg said. The Inter-Ministerial Committee (IMC), comprising of members from RBI, Sebi and IT ministry, was scheduled to give its report in July. “As soon as we are able to complete our work we will be to come out with it. It is not advisable to give a timeline,” he said.

The future of Indian Finance

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 [virtual currencies],” the bank said in a statement. Those that already provide cryptocurrency services will need to end the relationships within a specified time, which the bank said will be announced later.

The lack of proper regulation of Cryptocurrency exchanges by SEBI or any other regulator is sorely felt. It’s unclear if sufficient capital is available to guarantee the trades on these platforms, or whether the promoters have the requisite qualification and governance track record if the processes followed are aboveboard. This can result in huge losses to investors, creating a problem similar to the NSEL scam with no one to take the blame for it.

SEBI has to ensure investor protection for the market to completely embrace crypto assets. However, there appears to be genuine interest in crypto assets and their trading. Banning or actively discouraging this will only lead to stunted growth which will create problems in the future. Allowing these assets to be traded in the public NSE and BSE will make it easier to track and also transparent. Cryptocurrencies are entering their crucial stage of growth and trying to discourage their adoption by outright curbing their distribution might prove to be a costly move for the future of Indian finance. However, with this move, it seems like India is finally seeing the light and is taking baby steps in the right direction.

Follow us on Twitter, Facebook, Steemit, and join our Telegram channel for the latest blockchain and cryptocurrency news

Reports: India’s Crypto Regulations Delayed, Government Considers ‘Crypto Tokens’

Reports: India's Crypto Regulations Delayed, Government Considers ‘Crypto Tokens’

Regulation

The Indian government previously planned to submit the proposal for crypto regulations in July. However, a senior official has revealed that the regulatory framework for cryptocurrencies in India has been delayed and will likely be ready by the year’s end. Meanwhile, the government is reportedly considering “launching crypto tokens for financial transactions.”

Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space

Indian Regulations Delayed

Reports: India's Crypto Regulations Delayed, Government Considers ‘Crypto Tokens’ Subhash Chandra Garg.

The Indian government has been working on cryptocurrency regulations. A panel was set up in December last year under Subhash Chandra Garg, secretary in the department of economic affairs, to propose crypto regulations in India. The proposal was supposed to be ready in July and the regulations unveiled in September.

However, Quartz reported on Sunday, August 12, that a senior government official familiar with the panel’s discussions indicated that “now that ‘looks difficult’.”

The publication wrote, “India’s cryptocurrency regulations will likely come by end of 2018,” adding:

A finance ministry panel is still evaluating how to treat blockchain and cryptocurrencies separately.

The official explained to the publication that “there are lots of issues that need understanding and lots of studying needs to be done.”

The news outlet elaborated, “the key issue facing the panel is if regulations can be drawn up to push the use of blockchain independently” and quoted the official describing:

Blockchain is an interesting thing. We definitely want to milk it effectively for financial transactions. So all officials are really trying hard to understand how to separately use blockchain, without cryptocurrency…And understanding a new software takes time.

Indian Government’s ‘Crypto Tokens’

Reports: India's Crypto Regulations Delayed, Government Considers ‘Crypto Tokens’ On Friday, August 10, DNA India reported that the Indian government “is considering launching crypto tokens for financial transactions in the country, even as the existing ban on cryptocurrencies is likely to continue.”

While “crypto tokens are based on blockchain application,” the news outlet described that unlike cryptocurrencies, a “crypto token is a representation of money. It can’t be used in place of fiat money.”

The panel headed by Garg is also “studying the possibility of using various crypto assets, including cryptocurrency,” a senior official in the finance ministry explained and was quoted saying:

The committee is examining if crypto tokens can be used to replace smart cards such as metro cards in the public sector to start with. Similarly, in the private sector, it can be used in loyalty programmes such as air miles where its use is limited to buying the next ticket and can’t be converted into money.

While admitting that the new technology has a lot of promise, the publication noted that “Garg categorically denied allowing [the] use of cryptocurrency in any manner including in payment systems.”

When do you think India will finally come up with crypto regulations? What do you think of the government considering launching crypto tokens? Let us know in the comments section below.


Images courtesy of Shutterstock and the Indian government.


Need to calculate your bitcoin holdings? Check our tools section.

Will India Finally See Cryptocurrency Regulations in Place By End of 2018?

Cryptocurrency regulations in India have been a source of uncertainty for the markets since the government’s unprecedented tirade against crypto that began this past April. However, it’s reported that the government is now likely to finalize some common sense regulatory measures starting in late 2018.A finance ministry panel devoted to the issue has found that the main problem with cryptocurrency regulations is how to define and separate the blockchain from its cryptocurrency counterparts. The Indian government has taken a friendly stance towards blockchain technology, but is still slow to adopt similar opinions towards cryptocurrencies.The finance ministry panel, which is operating under the department of economic affairs, was expected to release its proposal on cryptocurrency regulation in July. That proposal has since been delayed for an unforeseeable amount of time.An unnamed government official working on the finance panel spoke to Quartz India, saying:“Blockchain is an interesting thing. We definitely want to milk it effectively for financial transactions. So, all officials are really trying hard to understand how to separately use blockchain, without cryptocurrency…And understanding a new software takes time.”The finance ministry has not yet responded to reports that cryptocurrency regulations will be finalized following further research on the topic.India’s Complicated Relationship with CryptocurrencyIndia began its battle against cryptocurrencies in April of 2018, when the Reserve Bank of India (RBI) isolated cryptocurrency exchanges by blacklisting them from financial institutions. This ban almost instantly dried up liquidity for India-based cryptocurrency exchanges, and officially began on July 5th.The RBI made a statement at the time of the ban, saying in part:“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 cryptocurrencies. Regulated entities which already provide such services shall exit the relationship within a specified time.”After much protest from investors and businesses affected by the ban, there was another twist to the situation. This came after an anonymous government official who explained that the government viewed the ban as more of a temporary measure while the country developed industry regulations.Last month, it was reported that a senior government official said:“I don’t think anyone is really thinking of banning it (cryptocurrencies) altogether. The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as (a) commodity may let us better regulate trade and so that is being looked at.”At this time, it seemed as though a governmental decision on the legalization of sports betting could have a positive impact on cryptocurrency regulations.Following a long-prepared case advocating for the legalization of sports betting, the Indian law commission mentioned using cryptocurrency as an efficient way to track sports bets, saying, “gambling transactions should be made cashless, making use of electronic means of payment such as credit cards, debit cards, net-banking, virtual currencies, etc.”The final hearing for the case on the legalization of cryptocurrencies is scheduled for September 11th, although the ministry’s apparent indecisiveness could lead to delays in the hearing. Nevertheless, sources familiar with the internal ministry decisions are confident that regulations will be finalized later in 2018.Featured image from Shutterstock.