Indian Blockchain committee head clarifies that cryptocurrency is not illegal in India

The Union Budget 2018 had something in store for the cryptocurrency startups and exchanges in the country.

Reiterating its earlier stand on cryptocurrency, Finance Minister Arun Jaitley, in the Union Budget for 2018-19, said:

“…The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. The Government will explore use of Blockchain technology proactively for ushering in digital economy.”

This statement, has resulted in much speculation on whether cryptocurrency has been banned, or what is the government’s legal position on it.

Ajeet Khurana, who recently took over as the Head of the Blockchain and Cryptocurrency Committee of India (BACC), clears the air on the issue in conversation with YourStory:

YourStory: What do you think about the FM’s mention on cryptocurrency in the Budget?  

Ajeet Khurana: We are extremely happy that something like cryptocurrency found mention in the Budget. It only goes on to say that the impact it has is so widespread, and there is an understanding that it exists in a strong way.

However, on the take of it not being a legal tender, we completely agree with the government on its position.

We understand the concern around the illicit use of cryptocurrency and have maintained this position. Cryptocurrency enterprises have been maintaining complete transparency through KYC and other procedures to reduce the illicit use of these assets.

YS: The FM stated that cryptocurrency is not a part of the ‘payment system’. What is your view on this?

AK: The payments system includes a lot of things like the settlement mechanism, and the banking system. In recent times, digital wallets and other payment mechanisms have been added to the entire scenario.

What the Finance Minister might be saying is that cryptocurrency is not considered to be a part of these payment systems. Similarly, gold is not part of a payment system, but people still barter assets like gold for goods, as long as both parties record the transaction. It is an asset barter transaction.

There is a little subjectivity on the matter. Can an individual swap cryptocurrency for another cryptocurrency?

We have to wait for clarification on what the Finance Minister meant when he mentioned payment system.

YS: What should the end-investor in cryptocurrency take from this announcement?

AK: There has been no indication by the government that it is banning exchanges. Neither does it stop people from holding a cryptocurrency. It is just saying that the government doesn’t recognise cryptocurrency as money, which no country in the world does except Japan.

YS: We see a powerplay when it comes to banks pulling out from crypto exchanges in the country. Isn’t this hinting at something? 

AK: We have had this discussion, and what we are sure of is that banks who have taken the action of not providing accounts or services to these exchanges have done it on their own will. They haven’t been instructed by the RBI to do so, and the Central Bank hasn’t issued any circular in this regard.

Banks have the right to choose their customers. My take on the banks that have pulled out is that they haven’t thought of the future, and this is completely a knee-jerk reaction.

We admire banks who have gone on to take the risk in understanding this industry.

Over the past few months, we have seen there have been customer service issues.

Despite this, the interest towards cryptocurrencies remains, and the fresh number of account opening applications continue to grow.

YS: Since the government mentioned cryptocurrency, what can be expected from regulators and even the government now?   

AK: It is understandable that any government will face challenges to regulate this system. If not a proper policy framework, we can at least expect the government to release a policy framework around cryptocurrencies this year.

This will be later essential to form policy and regulations on the issue.

YS: Isn’t BACC talking to the government about these regulations?

AK: Unlike other industries which have to worry about business growth, for cryptocurrency it is happening on its own. So BACC is freeing up the capital for education, and keeping the customer more informed.

As an industry, we are coming out with a course and certifications which help understand whether the customer has an understanding of the product and the risk associated with it.

The biggest risk of this industry is whether an investor understands the product completely.

We are talking to them on a weekly basis. And the known crypto exchanges have been using expensive risk management and KYC management software which the top banks deploy.

This gives them some amount of confidence.

YS: The FM also spoke about working on innovative technologies for Blockchain. What is your take on this?  

AK: There is a lot of experiment which is happening in the Blockchain sector. After all, it has exciting opportunities. So large scale projects are imminent. However, it is still a long shot since there are commercial applications of Blockchain in the country which are still being explored.