On Oct. 30, at a meeting of the financial stability and development council (FSDC), headed by finance minister Arun Jaitley, the issue of virtual currencies came up.
“The council…deliberated on the issues and challenges of crypto assets/currency and was briefed about the deliberations in the high-level committee chaired by the secretary (economic affairs) to devise an appropriate legal framework to ban use of private cryptocurrencies in India,” the government’s Press Information Bureau (PIB) said in a release.
The word “use” in the statement may imply that buying, selling, transacting, or its conversion into rupees may be banned but not possession itself, according to Crypto Kanoon, a platform engaged in regulatory analysis and raising legal awareness about digital currencies in India.
Representatives from the banking sector and the markets regulator were also present at the meeting. Subhash Chandra Garg, secretary in the department of economic affairs, who is heading a panel on cryptocurrencies, was also part of the meeting, as per the PIB statement.
The panel was set up in December 2017 and had been tasked with coming up with rules to regulate digital currencies. It was expected to submit the draft regulations by July but has since been delayed. BP Kanungo, deputy governor of the Reserve Bank of India (RBI), and Ajay Tyagi, chairman of market regulator Securities and Exchange Board of India, are also part of the panel.
Earlier this year, the RBI dealt a body blow to the cryptocurrency industry in India after it forbade banks to have any business relationship with the exchanges or traders after July.
This has had a disastrous effect on the virtual currency ecosystem in India. Volumes are one-tenth from the peak in November-December last year, and the situation is so dire that Zebpay, the country’s largest exchange, has already shifted out of India. Still, according to estimates, there are nearly 5-6 million cryptocurrency users in the country.
Pushed against a wall, the exchanges entered into a legal tussle with the RBI and the government. The matter is now in supreme court. In the last hearing on Oct. 26, the court had directed the government to clarify its stand on the matter of cryptocurrencies and to file an affidavit on it within two weeks.