India is thought of as a tech giant but there’s one technology it doesn’t like, even while other parts of the world do: crypto.
India’s Supreme Court has decided to keep in place a cryptocurrency ban on regulated financial institutions announced by the country’s central bank three months ago. This basically dries up a large portion of the crypto market in the second-most populous nation in the world.
On April 5, the Reserve Bank of India issued at statement saying, among other things:
“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs.” [Virtual currencies]
The fear, according to RBI, is that cryptocurrencies are used in money laundering and other criminal activities. Now that the Supreme Court has ruled to uphold the ban, it goes into effect on Thursday.
RBI isn’t as independent of a central bank as the Fed and, indeed, its ban is in line with Prime Minister Narendra Modi’s government’s anti-crypto stance.
Still, Modi appears to be another “short crypto, long blockchain” proponent. Just a couple of months before RBI’s statement, he tweeted what seemed to be a positive attitude toward the technology:
Disruptive technologies such as Block-chain and the Internet of Things, will have a profound impact in the way we live and work. They will require rapid adaptation in our workplaces: PM @narendramodi
— PMO India (@PMOIndia) February 19, 2018
India’s take on crypto stands in stark contrast to that of other Asian countries, such as Thailand and South Korea.
In May, the Thai government issued two emergency decrees dealing with “digital assets”. Rather than banning cryptos, Thailand is trying to regulate—and tax—them.
South Korea, where crypto trading is almost a national pastime, is taking an even more active stance by outright investing in blockchain technology. Two weeks ago, the country’s Ministry of Science and ICT announced an ambitious ₩230 billion ($206 million) investment with the hope of creating 100 blockchain companies hiring 10,000 people over the next four years.
Meanwhile in Europe, a new report published Monday and prepared for the European Parliament’s Committee on Economic and Monetary Affairs recommends standardized crypto regulation. Written by Marek Dabrowski and Lukasz Janikowski from Center for Social and Economic Research, the reported titled “Virtual currencies and central banks monetary policy: challenges ahead” said:
“Financial regulators may dislike VCs because of their anonymity or cross-border circulation. They tend to fear that VCs will facilitate money laundering, the financing of illegal activities, tax avoidance, the circumvention of capital controls (in countries where such controls are in place), and fraudulent financial practices. Such concerns may be legitimate in some instances but must not be generalised. In most cases, transactions in VCs result from the free business choices of economic agents and, therefore, should be treated by regulators as any other financial transaction or instrument—that is, proportionally to their market importance, complexity, and associated risks.
Given their global, trans-border character, it is recommended that regulations concerning VCs be harmonised across jurisdictions (which is far from the case now). Investment in VCs should be taxed similarly to investment in other financial assets.” [Emphasis ours]
Switzerland, which is not part of the E.U., may soon try to get its banks to warm up to crypto. While Swiss banks worry about tax evasion in light of their battle and subsequent deal with the U.S., the country’s government could be working on making Switzerland an even more crypto-friendly territory. As reported by the Financial Times on Monday:
“Heinz Tännler, finance director of Zug canton, said he expected Swiss politicians and regulators to remove obstacles in coming months, allowing crypto companies to operate with banks in the same way as other companies.
‘We hope to clarify relationships by the end of the year at the latest,’ he told the Financial Times. ‘Time is pressing — other jurisdictions such as Malta and Singapore are very active and making a lot of effort to attract these companies. The lack of access to bank services is a significant competitive disadvantage.’”
India’s stunning growth over the past quarter of a century can be traced to the economic liberalization policies enacted in 1991. Whether the country’s relative position as a tech powerhouse will continue as it tries to stifle crypto now remains to be seen.