CoinRecoil, a defunct Indian cryptocurrency exchange, had earlier filed a writ petition against the RBI circular to ban crypto firms from using traditional banking services. Kunal Barchha, the co-founder of the exchange, wrote an open letter to Prime Minister Narendra Modi, detailing all of his concerns and frustration, as reported by INC42, June 30, 2019.
In his letter, Kunal Barchha outlines the high expectations from the public of the Modi government and their ability to convert a lot of these desires into reality over the past five years. However, the deafening silence regarding the cryptocurrency industry in India is stifling innovation and kill the dreams of budding entrepreneurs with a passion for this space.
The government’s concerns over scams and the funding of terrorist activities are most definitely legitimate, especially considering the current tensions between India and neighboring country Pakistan; this, however, shouldn’t translate to an outright ban, but rather stringent yet reasonable regulation.
The RBI’s concerns for investors being duped is also legitimate, but Barchha also brings up a valuable point – that most stock exchange listed companies in India are not all that transparent either. The recent liquidity crisis caused by a default by IL&FS and DHFL has underscored the need for money that is not tied to the current financial system.
The government has formed a committee to analyze this space, constituted of experts in revenue collection and monetary policy, noted by the absence of a single specialist in IT, fintech, or any other field that broadly encompasses cryptocurrencies. In spite of this, the committee has never bothered to engage in healthy discussions with their own citizens.
Even the SEC and other investment authorities in the USA engage with the public and take their opinions into account while formulating a final decision.
Headed Toward More Uncertainty
Indian exchanges are by no means lagging behind on ensuring a crackdown on illicit funding. Strict KYC procedures and the absence of cash deposits means each and every rupee going into the exchange is accounted for by a particular individual, whose tax, address, and other personal details are registered with the exchange.
It wouldn’t be farfetched to say the KYC procedure of Indian exchanges is on par with brokers and depository participants who engage in traditional capital markets.
The recent shutdown of one of India’s largest exchanges, Koinex, means that cryptocurrency landscape in India is heading for more uncertainty and regulatory discomfort. While the government can’t stop people from holding and transacting in cryptocurrency, they can stop vendors and merchants from accepting it and completely ban conversion to INR.