India to Ban Crypto as Payment Method but Regulate as Asset: Report

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17 November 2021

India will ban the use of cryptocurrencies for making payments, but will allow and regulate trading of crypto as assets, the Economic Times reported citing government sources.

  • The government plans to present a crypto regulation bill in the parliament?s winter session, details of which are being finalized. The bill appears to have changed course from the earlier plans to ban crypto in the country.
  • In the bill, authorities will also ban ?active solicitation? from crypto firms, including exchanges and platforms, ET reported.
  • The issue of advertising has triggered a ?big debate,? with some thinking that ads mislead youth, Tanvi Ratna, founder and CEO of think tank Policy 4.0 told CoinDesk.
  • Crypto exchanges WazirX and Bitbins have paused their ads, ET also reported. A WazirX spokesperson told CoinDesk that the exchange stopped advertising in August, adding that ET?s headline is misleading, while CoinDCX declined to comment on the report.
  • The government held a meeting with crypto industry representatives on Monday, adding onto a series of closed-doors discussions between government and the Reserve Bank of India (RBI) that have taken place in the last few days.
  • ?Regulating crypto as an asset doesn?t solve all the issues that authorities are concerned about, but it does take it out of the currency arena, which is one of RBI?s worries,? Ratna said.
  • ?The trickiest part is defining the asset class,? she said, adding that current discussions to regulate crypto as a commodity are not a good fit. But other RBI concerns are more challenging to solve, such as financial stability, capital controls, and exchange rate risk, Ratna noted.
  • Price arbitrage has emerged as a new worry, ET also reported on Wednesday, citing anonymous sources. Authorities are concerned about how any regulator could keep tabs on multiple exchanges ?when there is a huge price difference and an opportunity for a price arbitrage,? according to one of the sources.
  • The exchanges are pushing for a regulatory sandbox to fine-tune the regulations, according to the report. The Securities and Exchange Board of India could be designated as the regulator, but no ?final call? has been taken on this issue, the report added.

Read more: India Likely to Regulate Crypto, Not Ban It, in Upcoming Budget: Report

UPDATE (Nov. 17, 07:50 UTC): Adds CoinDCX comment in fourth paragraph, corrects eight paragraph to say that ET reported on Wednesday.

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