You must be well familiar with Cryptocurrencies. Dash, Zcash, Ripple, Monero, Ethereum, Stellar and even the famous Bitcoin. The list is long. A cryptocurrency is a virtual currency which works as a medium of exchange. Tax evaders love them as it helps evade taxes.
Among all currencies, Bitcoins are the most famous. They run on a shared public ledger called a blockchain. Every transaction in the World is recorded in the Blockchain.
Bitcoins are not legal tender in India and are not recognized as a medium of exchange. Arun Jaitley had also clarified that Bitcoins are not a legal currency in India.
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RBI in April this year had given banks and other RBI-regulated entities, 3 months to wind up existing relationships with firms and individuals dealing in cryptocurrencies. The RBI Deputy Governor, Kanungo had also said that virtual currencies adversely impact market integrity and make capital controls very difficult.
Capital control is of 2 types:
Yes, the Finance Minister Arun Jaitley had said that Cryptocurrencies are not legal tender. But, cryptocurrencies have not actually been banned.
Even legal experts have said that there’s nothing to suggest that cryptocurrencies have been completely banned. A committee was set up headed by Subhash Garg, (Secretary, Department of Economic Affairs of Ministry) in December 2017. Its work was to make recommendations on Cryptocurrencies and regulate them.
This committee is discussing what should be reserved and what not. Lots of work has gone into this and things are being discussed on what should be reserved and what not. This issue should be wrapped up within the first fortnight of July.
Many citizens are looking at this as a sign that a blanket ban has not been imposed on cryptocurrencies.
The cryptocurrency exchanges have taken the battle against RBI to the courts. Exchanges, Individuals and even industry bodies have filed multiple petitions in different High Courts in India.
These entities believe that if the RBI wants to prevent money laundering and other illegal activities, better means must be adopted rather than shut the business of cryptocurrencies.
Crypto exchanges may be subjected to anti-money laundering and KYC rules just like what happens in the case of other financial services. They could follow a set of reporting obligations and monitoring, just like other financial services.
Crypto exchanges have even made representations to the RBI highlighting how all these concerns can be addressed.
Banks would soon stop services to crypto-exchanges. But, crypto-exchanges can easily continue crypto-to-crypto transactions. You or any other investor in crytocurrencies will not be able to buy/sell crypto assets for rupees or other currency. These crypto exchanges will only allow trading from one crypto currency to another.
The crypto currency exchanges and platforms will continue to be active and all your crypto assets will remain on the exchanges. Any cash deposits will be sent back to customers.
All large transactions involving banks vis-à-vis cryptocurrencies will stop. Micro-transactions would take place in cash. Exchanges would not do this, but a peer-to-peer system could be involved.
Cryptocurrency exchanges have seen a reduction in the number of new customers. This reflects in the volume of trade. Cryptocurrency exchanges are asking customers to withdraw their rupee deposits.
Cryptocurrency exchanges are sending mails to customers helping them with the withdrawal process. Cryptocurrency exchanges are asking customers to hurry up and make the withdrawals before July 5th 2018.
If you are an investor in cryptocurrencies, Cryptocurrency exchanges will not be able to help you after July 5th unless there’s a change in the law.
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