India may reverse blanket crypto ban, government to form panel for regulating digital assets

• India is seeking to form a new committee to study the likelihood of regulating cryptocurrencies in the country.
• This move comes after years of anticipating a blanket crypto ban in the country, in addition to a strict bill proposed earlier this year.
• The new panel may also study ways to operationalize the central bank’s proposed digital rupee.

The Indian government is looking to set up a new panel of experts to review the possibility of regulating cryptocurrency in the country, reversing the blanket ban on digital assets.

Indian government to take a fresh look at crypto

Former finance secretary Subhash Garg proposed a blanket ban on the new asset class in 2019. In March, India proposed one of the world’s strictest policies against cryptocurrencies, which would criminalize possession, issuance, mining, trading and transferring digital assets.

While the Indian government has not formally banned the new asset class, the country’s banks appear to have been cracking down on digital currencies and crypto exchanges. According to members of the local cryptocurrency community, banks are halting transfers to digital asset-related accounts.

A limited amount of fiat is received at exchanges, and traders have also received notifications from banks inquiring about crypto-related transactions and warning that their accounts may be closed. 

The country’s central bank, the Reserve Bank of India, has approached banks to reconsider ties with crypto exchanges. Since 2018, RBI had forbidden banks from dealing with Bitcoin and other digital currencies. 

Now, within the government, there has been a new view that the suggestions previously made by Garg are dated. An official with knowledge of the matter said:

There is a view within the government that the recommendations made by the Subhash Garg are dated, and a fresh look is needed at the use of cryptos rather than a total ban.

The Indian government may form a new panel of experts to study the likelihood of regulating cryptocurrencies. The committee may explore the use of blockchain for technological advancement and advise on regulating cryptos as digital assets rather than currencies.

Anurag Thakur, the Minister of State for Finance & Corporate Affairs, met with members of the digital currency and banking industry forums. According to the unnamed source, Thakur could be under consideration for being part of the committee.

The finance ministry monitors the growing volume of crypto trading in the country and examines potential supervisory risks with stakeholders. Currently, these discussions are at an early stage, and no formal outcome has been achieved. 

---