Indian officials appear to be re-thinking their positions regarding cryptocurrencies, which have favored a ban, while the Reserve Bank of India has gone so far as to declare that cryptocurrencies are illegal. A second governmental inter-ministerial committee has been formed to address the issue of crypto legislation, and the rumor on the street is that they are considering a relaxing of strict regulations.
According to one insider acquainted with committee discussions: “We have already had two meetings. There is a general consensus that cryptocurrency cannot be dismissed as completely illegal. It needs to be legalised with strong riders. Deliberations are on. We will have more clarity soon.”
There were similar reports surfacing in mid-2018, but nothing ever came to fruition. The first committee that had been formed in 2017 had recommended a ban, and subsequently, the central bank declared cryptos illegal. Banks were forbidden from assisting any crypto firm, i.e., provide bank accounts. As a result the one crypto exchange in India, Zebpay, had to shut its doors, stating that, “The curb on bank accounts has crippled our, and our customer’s, ability to transact business meaningfully. At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business.”
The global regulatory position on cryptocurrencies, however, has gradually been softening, and the general consensus among Indian officials is that they can no longer dismiss cryptocurrencies out of hand. India, second in population only to China may choose to embark upon a different path than its neighbor. Back in September of 2017, China banned crypto exchanges and Initial Coin Offerings (ICOs), but it has chosen to invest heavily in blockchain technology developments.
Crypto enthusiasts in India, however, are holding their collective breaths once again. Although there seem to be moves afoot to lift the cryptocurrency ban and permit regulated exchange trading again, the decision is happening at a time when a major scandal involving a digital coin offering is dominating the news headlines in the country.
The $70 million crypto scam, as the press has referred to it, was a purported ICO promoted by a cast of characters, calling themselves “The Flintstone Group”. Recent stories have alleged: “The group launched a fraudulent cryptocurrency called Money Trade Coin (MTC), hoodwinking 25,000 investors with promises of massive returns, which, of course, never materialized. The Flintstone Group went to great lengths to convince investors of the legitimacy of their project, posing as Union Finance Ministry officials at one point with fake I.D. cards and backstories.”
The chief protagonists in the scam were Amit Lakhanpal, a real estate magnate, and his chief accountant Sachin Shelar. The police has filed indictments for five men, but these two men are nowhere to be found. According to one report: “Lakhanpal and chief accountant Shelar have since fled the country, perhaps to Dubai or England – however, they remain at large and their exact whereabouts are unknown.”
The inter-ministerial committee has representatives from the Reserve Bank of India, the Ministry of Finance, the Ministry of Home Affairs, the Ministry of Electronics and Information Technology, the National Institution for Transforming India, the State Bank of India, the Central Board of Direct Taxes, and the Securities and Exchange Board of India. Will this austere group relax the existing hard line against cryptos? It is difficult to speculate a positive re-positioning, while the current ICO scam is fresh in their minds.