After the Reserve Bank of India, the central banking institution which controls the monetary policy of the Rupee, clamped down on Bitcoin, the cryptocurrency sector has been rife with challenges. Earlier this year in April, RBI banned on dealing with virtual currencies, both cryptocurrencies and crypto assets, since such transactions raised concerns about money laundering, consumer protection and market integrity. The RBI had also cautioned users against the trading and use of cryptocurrencies.
Then came another blow to blockchain with news about Zebpay, India’s first and most trusted and secured bitcoin and cryptocurrency exchange, shutting down their operations in India. The company moved its base from India to Malta. Despite the Government’s stance on the utilisation of blockchain technology, the cryptocurrency market in India has seen low transactions and P2P transactions.
The Aftermath Of The Ban
The current regulations clearly indicate that the ban will reduce the exposure to cryptocurrencies like Bitcoin or Ethereum and will also limit the growth in the global crypto space. Even though there is a spurt in the number of blockchain startups in India, the explosion of cryptocurrency is fraught with several challenges. Banks have also prohibited their customers from using their credit or debit cards for investing in cryptocurrency. In fact, according to a news report, Yes Bank issued a directive to its customers to ban the use of its mobile banking, net banking, and debit/credit card towards the purchase of or trading in virtual currencies.
- RBI has instructed banks and financial institutions to stop accepting the digital currency as a mode of payment and stop investing in it because all this money is public money and the regulator cannot allow these institutions to put the public money at risk without proper laws to protect customer interests
- According to an ET news report, the Income Tax department gave around 500,000 notices to Bitcoin and other cryptocurrency investors and sought answers to 28 questions
- Since RBI has instructed banks and financial institutions to stop accepting the digital currency, investors are increasingly facing losses in cryptocurrency trading and crypto-exchange business is looking bleak
- Essentially, RBI has raised concerns over the de-centralised nature of Bitcoin and also flagged issues surrounding its valuations.
- In August, it was reported that RBI has formed a new unit to work on emerging technologies like cryptocurrency, blockchain and AI.
- According to the latest report, players in the Indian cryptocurrency market have now formed a new focus group to lobby against RBI’s strict measure. The Internet and Mobile Association of India formed a committee to identify the challenges and opportunities in the blockchain sector and work with the Government
- This committee features representatives from leading companies such as IBM, Microsoft, Mastercard, and Zebpay. The committee has been formed to deliver a positive impact in the cryptocurrency community and help the government to re-formulate some regulations imposed on the market during this and the last year.
- The key point is, despite its promise and several use cases, especially in the finance sector, which is the first to benefit from distributed ledger technologies, blockchain technology is facing immense challenges in India
Future Of Cryptocurrency May Be Bleak, But Blockchain Is At An All-Time High
While it is still too early to comment on the demise of cryptocurrency in India, the technology will only take off after the Government’s intervention and regulatory policies are put in place. Tina Singh, Chief Digital Officer at Mahindra Finance, who is chairing the committee emphasised that blockchain is the technology of future and will usher in decentralisation, trust and accountability in business.
Interestingly, RBI’s technology research unit, known as Institute for Development and Research in Banking Technology (IDRBT) is also finding out how blockchain can be leveraged by the Indian banking and financial sector through workshops with bankers, regulators, academicians and technology partners. The tech arm also submitted a whitepaper which had details about possible use cases for adoption.
On the other hand, Andhra Pradesh government has inked a memorandum of understanding with leading tech companies to implement a blockchain ecosystem and also plans to move all its department data relating to property titles and vehicle ownership records onto a blockchain platform to set up a unified register. According to a report, close to 100,000 land records are now stored on the blockchain platform. Not just that, blockchain adoption, especially in the insurance sector in India has been on a rise. Around 15 Indian insurance companies are liaising with a global tech firm to develop blockchain solutions.
According to 6Wresearch, the Indian blockchain technology market is expected to touch 58% by 2024. The report further reveals that the growth in the digital payment market will also give the desired push for the integration of blockchain technology for much-secured transactions.
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Richa Bhatia is a seasoned journalist with six-years experience in reportage and news coverage and has had stints at Times of India and The Indian Express. She is an avid reader, mum to a feisty two-year-old and loves writing about the next-gen technology that is shaping our world.