Constitutional Challenges to Complete Cryptocurrency Ban in India
In 2017, it was reported that the Reserve Bank of India (RBI) is considering a proposal to introduce its own cryptocurrency, similar to Bitcoin. The digital token was supposed to be called Lakshmi in honor of the goddess of wealth. The idea died a premature death. After hesitating about whether to use cryptocurrencies or avoid their advances, politicians seem to have opted for the latter, taking the opposite stance towards digital currencies, going as far as outlawing their use and threatening to imprison those holding them.
In our opinion, the bill takes an extreme position, since it proposes to criminalize activities with an asset, in which thousands of people have invested, as a legal economic means. Jurisdictions such as USA, EU. and Japan have found ways to regulate cryptoassets to mitigate risks and promote benefits. It has also been recommended by the G20 and the Financial Action Task Force, the global watchdog against money laundering, says Jaideep Reddy, Nishith Desai Associates.
He adds that the law creates uncertainty because it does not list ways that Indian investors can get rid of their assets. Due to criminal penalties, Indian buyers will not be able to buy, and the law does not say anything about cross-border transfers through bank channels. It should also be noted that the definition of cryptocurrency in the draft law is open and may require more precise wording, Reddy said. He reiterated that there was no reason to panic, since the bill was just a committee recommendation, not a binding decision.
There were no technical technology experts on the committee. Now the government must decide what action to take based on the committee’s report, ”he adds.
Some crypto exchanges have made a radical decision to register their companies overseas in order to circumvent the unfavorable legislation in India. As a startup from India, we have always wanted to work from India, but this recent complication has made it difficult for domestic cryptocurrency exchanges to do business in India. So we are now an Estonian company and any Indian cryptocurrency criminalization law will not affect us, says Rahul Jain, Growth & Marketing Digital, Bitbns.
Mastercard, Bank of New York Mellon, Tesla are some of the largest global firms that have jumped aboard a crypto train.
However, India has decided to go the other way and plans to introduce a law prohibiting the trading of all cryptocurrencies except those issued by the government itself. While lawyers agree with State Finance Minister Anurag Thakur when he says the existing laws for dealing with cryptocurrencies are inadequate, they disagree on the constitutionality of the outright ban.