India May Avoid Banning Cryptocurrency, Considering New Asset Classification

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Following news reports detailing the Indian Supreme Court’s likely decision to uphold the government’s ban on the trading of cryptocurrencies, it now appears that authorities are likely to choose against a sweeping ban and instead classify cryptocurrencies as commodities.

Quartz was first to report this breaking news, citing an anonymous government official who spoke on the topic.

 “I don’t think anyone is really thinking of banning it (cryptocurrencies) altogether. The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as (a) commodity may let us better regulate trade and so that is being looked at,” the anonymous senior government official said.

The ban was originally announced in April, when the Reserve Bank of India (RBI) said that all financial institutions within the country would not be allowed to work with cryptocurrency exchanges.  At the time of the ban, the RBI said:

“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 cryptocurrencies. Regulated entities which already provide such services shall exit the relationship within a specified time.” 

More recently, the Indian Supreme Court said that the April ban would remain in place, and that the lower courts would not be allowed to accept petitions from exchanges and companies affected by the ban. The RBI argued that the existence of digital currencies in India is counter to the law, which states that all currencies must be physical and stamped by the government.

The unnamed government official seemed to believe that the April ban was more of a temporary measure while the government made formal decisions on regulation. He emphasized that the government’s concerns are not surrounding cryptocurrencies themselves, but rather the illegal activities they could be used for, saying:

“Trade is not a criminal offence. Most of us trade in various asset classes in the stock market. So how is this [cryptocurrency trading] any different? What has to be in place is a mechanism to be sure that the money used is not illegal money, and to track its source is the most important thing.”

The possibility of cryptocurrencies being regulated as commodities in India is positive news for the industry as a whole, as the Indian markets were quickly growing and accounted for millions of dollars in trading volume.