Last January, the Indian government announced its plans to introduce a bill that would ban private crypto in the country and provide a framework for the creation of official digital currency to be issued by India’s central bank (RBI). The proposed bill that seeks to “prohibit all private cryptocurrencies in India” has sparked intense debate among crypto investors and industry experts, many of whom believe the intended legislation could have disastrous consequences for the future of crypto in India.
So how did it come to this? What options are left for Indian crypto investors if the authorities decide to go ahead with the ban? And is this really the end of crypto in India?
Ban, rescind, ban again
This is not the first time Indian authorities announce their intentions to introduce a sweeping ban on crypto. In fact, their struggle to prohibit cryptocurrency has been going on since 2013, the year when RBI had first cautioned Indian investors against dealing in virtual currencies.
In 2018, the Indian government panel recommended forbidding all private cryptocurrencies in the country, proposing up to 10 years of prison for anyone holding them. The same year, RBI issued a circular that barred banks from dealing in crypto. All these measures against private crypto threw Indian crypto industry into disarray, making many local cryptocurrency platforms to close down their operations. The monetary regulator’s ban on crypto was overturned by India’s Supreme Court in 2020, only to return in its current form as a Cryptocurrency Regulation Bill this year.
A billion-dollar mistake
Needless to say that the news regarding the proposed crypto regulation bill was met with somewhat of a disappointment among the Indian crypto community. Since India’s plans to ban crypto have been reintroduced, countless investors have been speaking against it on social media, often comparing the government’s plans to prohibit private cryptocurrencies to “banning the Internet in the 90s”. #IndiaWantsCrypto, a hashtag that had gained a lot of traction among Indian Twitter users during the temporary ban of crypto in 2018, has once again gone viral.
According to Nischal Shetty, the CEO of India’s major cryptocurrency trading platform WazirX, the proposed cryptocurrency ban will impinge on the interests of more than 7 million Indians holding over $1 billion worth of assets. Although the fate of private crypto in India remains uncertain, many of these investors are already considering their options in case authorities go ahead with the ban whilst also waiting for further details regarding the impending bill.
Fight the power
So what are the Indian investors’ options in the event of the ban enforcement? As it turns out, they don’t have that many.
For one, Indian investors could transfer their cryptocurrency funds to their relatives or friends living abroad before the ban goes into effect. However, given that cryptocurrency coins represent a taxable asset in most jurisdictions, in doing so they will basically shift the burden of paying the tax on their recipients.
There’s also a second option: in order to protect ownership of their coins, investors could also resort to self-hosted cryptocurrency wallets (aka self-custody wallets) that allow individuals to store their crypto on their personal devices instead of online wallets provided by third parties.
Although in this event authorities could technically still trace back the funds transferred via online wallets provided by Indian cryptocurrency exchanges due to know-your-customer rules, as for now, this seems like the most reasonable course of action. After all, apart from the previous option, there’s really not much Indian investors could do other than just resign and flog off their assets, — most likely at below market value.
If you want to learn more about crypto services in India, check out our article on how to buy and sell Bitcoin in India!
The content of this article is for informational purposes only and should not be construed as investment advice. We ask you to do your research.
