China’s crackdown: Who will regulate Bitcoins in India?

Bitcoin has had a tumultuous month, losing significant value after a crackdown on digital currency in China. Though, bitcoin has partially recovered since then, bitcoin exchanges and wallet providers in India are spooked by the tightening of regulations abroad, unsure how India would respond.

On September 4, China announced a ban on ‘initial coin offerings’, a crowdfunding method based on transaction of digital tokens. This caused the value of bitcoin, the largest digital currency, to crash from $4,319 (Rs 2,72,831.23) to $3,226 in a 10-day period, and the shuttering of two major China-based bitcoin exchanges: BTCC and ViaBTC. News agency Reuters also reported that regulators in Beijing have demanded all bitcoin exchanges be shut, though, according to digital currency tracking website Coindesk, bitcoin exchanges Huobi and OKCoin have only stopped Yuan-to-bitcoin trading, so far.

While no such crackdown has been issued in India, exchange founders and cryptocurrency wallet providers are concerned. “Trading won’t stop around the world. All Chinese users will trade on global BTC exchanges. But since China used to supply maximum liquidity, this is very serious. Around Rs. 1 lakh have dropped in this week itself. My sense is that it will crash more in the coming days but will soar again around January,” said Mohit Kalra, CEO of Coinsecure India, a bitcoin exchange.

“Banning bitcoin is bad for any economy, as trading won’t stop at all, and people will sell their coin in some other country and will never get that money in India. All trading will happen in cash illegally, which is even worse. I hope Indian government is smart enough to not ban it. It will be a blunder,” said Kalra.

Most are anticipating a crackdown in India as the Reserve Bank of India has issued multiple circulars cautioning the “users, holders and traders of Virtual Currencies”. “The Reserve Bank of India advises that it has not given any licence / authorisation to any entity / company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk,” read an RBI notice issued on February 1.

Yet, India has not explicitly banned digital currencies, and hence, a more clear-cut regulation from the government is wanting. In May this year, the Central government sought the public opinion on regulation of cryptocurrency on its website, mygov.in. As on May 30, the deadline for submitting the response, the website recorded a total of 3,889 comments.

Also, an advisory panel formed the Finance Ministry has empowered 16 members to look into the issue. The panel is yet to submit its report as it is still in talks with various stakeholders.