India and blockchain technology

Digital currency is seeking attention of government of various countries. With blockchain as the core technology underneath, virtual currency is growing fast across the globe. Central bank of few countries has already agreed to study the technology and its legal structure governing the value of the currency. India is soon going to join the pool for considering study of blockchain.

In the recent press release by Ministry of Finance, Govt. of India, it is communicated that a committee is organized to study the present status of Virtual Currency (VC's) (otherwise known as cryptocurrency or digital currency) both in India and globally. Department of Economic Affairs of Ministry of Finance, India has constituted an Inter - Disciplinary Committee to inspect the existing framework of digital currency and has been tasked to submit its report within three months. The committee will study the present status of Virtual Currencies both in India and globally, examine the existing global regulatory and legal structures governing Virtual Currencies, examine any other matter related to Virtual Currencies which may be relevant and suggest measures for dealing with such Virtual Currencies including issues relating to consumer protection, money laundering, etc. This committee will have representatives from Department of Economic Affairs, Department of Financial Services, Department of Revenue (CBDT), Ministry of Home Affairs, Ministry of Electronics and Information Technology, Reserve Bank of India, NITI Aayog and State Bank of India and will be chaired by Special Secretary (Economic Affairs).

Unlike, monetary authority of other Eastern countries, India seemed to be in denial mode since the inception of the blockchain technology. Reserve Bank of India (RBI), the monetary authority of India, had released an official warning against “Decentralized Digital Currency” or “Virtual Currency” (VCs), such as, Bitcoins, Litecoins, bbqcoins, dogecoins etc., their usage or trading in the country in Dec 2013. Ever since, the struggle of exchange owners and the govt. is on. In February 2017, another press release on advisory against 'Virtual Currency' by RBI was released. The RBI stated that, “The Reserve Bank of India advises that it has not given any license / authorization to any entity / company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk.”

Post this news, Bitcoin players such as Zebpay, Unocoin, Coinsecure and Searchtrade joined together to form the Blockchain and Virtual Currency Association of India in February. Although, this is not the first association formed. In 2014, there was a previous Bitcoin association in India called the Bitcoin Alliance of India which is now defunct. According to the CEO of bitcoin exchange Coinsecure, Mohit Kalra, this association failed because Bitcoin companies were still small at the time.

Whereas, Monetary Authority of Singapore(MAS), Hong Kong Monetary Authority (HKMA) have already announced the successful completion of Proof of Concept (POC) of Distributed Ledger Technology (DLT) in their respective financial associations.  Australian Securities and Investments Commission (ASIC), has released an information sheet on DLT, designed to help both ASIC and financial service providers or infrastructure operators evaluate whether the use of DLT would allow an entity to meet its regulatory obligations. With Japan's official announcement of mainstream adoption of Bitcoin, more retailers have started accepting Bitcoin in Japan.

After the recent demonetization drive in India, more people get engaged with digital payments. Nation's inclination towards the search of alternative mode of transaction, probably persuaded the Govt. of India to rethink about legal structure of 'Virtual Currency' starting with its study across the world.

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