India may not ban completely but will clears private cryptocurrencies and not allow trading on foreign platforms

According to comments from a government official running contrary to earlier reports, India may be getting closer to legalizing private cryptocurrencies but whether investors are allowed to trade them on foreign platforms remains a matter of speculation.

India to regulate, not ban, crypto

A cabinet note circulated by the government on the much-awaited Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, has suggested that crypto assets—as the legislation describes cryptocurrency—will be regulated by the Securities and Exchange Board of India (SEBI), NDTV reported yesterday (December 2) quoting an unnamed source.

The note, according to NDTV, suggests that a cut-off date will be laid for those invested in crypto assets to declare their holdings and bring them under crypto exchanges. Since SEBI is the regulator of India’s capital and securities market, the chances are that it may not allow investors to hold such assets on similar trading platforms outside India. This also means cryptocurrencies will be recognized only as an asset class for investment and not as legal tender.

The bill is expected to be tabled in the ongoing winter session of parliament. This development has brought cheer to India’s cryptocurrency stakeholders, although further clarity is keenly awaited. While there is no official data on cryptocurrency holders in India, industry estimates hint at up to 20 million investors holding around Rs40,000 crore in all.

The reports from NDTV have been welcomed by some Indian crypto investors. Redditor “ultron290196” posted in the r/cryptocurrency subreddit expressing relief at potentially no longer having to worry about an outright ban.

“It seems our Indian crypto movement is getting noticed by the government, and they’re finally deciding to regulate Cryptocurrency as Crypto “Assets” and not recognized as legal tender. […] All in all, it’s a sigh of relief for us Indian folks. I’d rather pay some tax than become an outcast,” they said. Not everyone was as pleased with the details with “No-Incident-8718” writing, “here’s the catch. No use of hard wallets only exchanges wallets. Also, only using Indian exchanges.”

On November 30, during the winter session of parliament, finance minister Nirmala Sitharaman flagged the potential for fraudulent activities using digital tokens and said they were being monitored. She also said the government had no proposal to recognize bitcoin as a currency.

While the Reserve Bank of India’s digital currency is in the works, issues related to cryptocurrency, too, will fall under its purview. The government has reportedly received a proposal from the central bank to include them in defining a “banknote.”

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