Cryptocurrency Regulation in India – A brief history

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Starting with the introduction of cryptocurrency introduced by the group of pseudonymous developers by the name of Satoshi Nakamoto named Bitcoin. Though the introduction of cryptocurrencies and creating a presence in the market was not easy. Bitcoin was introduced in the market in 2008 and took more than a year to have its first transaction, the first transaction proceeded in January 2009. And the first-ever product purchased with the use of bitcoin was in 2010 which is for the purchase of two pizzas in exchange for 10,000 bitcoins. While, this news made the cryptocurrency market a bit popular, and after which many cryptocurrencies were introduced in the market such as Litecoin, Namecoin, and Swiftcoin, etc.

Meanwhile, cryptocurrencies were also blamed to be a part of the dark web and being involved in illegal transactions. Though these roadblocks haven’t worked out and kicked out the deformities, cryptocurrency survived and emerged as the new investment platform. In the next five years trading in the crypto market just shown the increasing marks and people having fun dealing in cryptos as it is less risky than any other trading or investment platform. Though in this time bitcoin shot the market and the prices were subsequently gone up. Where they shot up by 5 Dollars to 1000 Dollars.

From 2012 to 2017 cryptocurrency in India has got massive popularity. India is now one of the steadily uplifting crypto markets and dealing in currencies such as Zebpay, Coinsecure, Unocoin, Koinex, Pocket Bits, and Bitxoxo. Where trading in India is increasing due to an increase in popularity, the cryptocurrencies were shooting prices which are notified by the people around the borders.

Though in 2013 the RBI issued a press release after monitoring the trading in Bitcoin India and Cryptocurrency market. This press release was to exhort people regarding dealing in virtual currencies. After this in 2016 Indian economy had fore-fronted the demonetization with the government declaration. The demonetization leads to more emphasis on digital transactions which was the biggest opportunity for online banking alternatives such as cryptocurrencies. The demonetization of 2016 eventually shifted people to deal in virtual currencies and towards the digital platform i.e. towards the cryptocurrencies. This situation drove up the exchanges of the cryptocurrencies. This increased engagement of Indians forced RBI to issue a second press release in February 2017 with strict orders mentioning the concerns raised in the press release of 2013.

In 2017, two public interest petitions were raised in the Supreme court by February 2017 Siddharth Dalmia and DwaipayanBhowmick regarding the restrictions on trade in cryptocurrencies. Eventually, both the Petitions are still pending with the Supreme court.

In 2017 only, the Government of India embodies a high-level Inter-ministerial committee headed by Shri Subhash Chandra Garg comprising of Shri Ajay Prakash Sawhney (Secretary, Ministry of Electronics and Information Technology), Shri Ajay Tyagi (Chairman, Securities, and Exchange Board of India) and Shri B.P. Kanungo (Deputy Governor, Reserve Bank of India). This committee was formed to remotely study the issues regarding virtual currencies and to come up with the specific actions to be taken in this regard. The committee has submitted its report in July 2019 and said to take the required actions regarding the ban on the private cryptocurrencies in India.

In December 2017 the government of India and The RBI has issued another press release to warn the general public regarding the investments in virtual currencies like cryptocurrencies and to deal with the uncertainties of the crypto market. By March 2018, the Finance Ministry and RBI have issued various press releases to cautious people regarding the risk involved.

On 6th April 2018, the circular was passed by RBI concerning prevent all the commercial and other banks in India and clearly ordered to stop providing services and dealing in cryptocurrencies. The Circular was issued to all the commercial banks, non-cooperative banks, Payments Banks, Small Finance Banks, NBFCs, and Payment System Providers. This circular was passed in effect that any bank will not liable to provide any kind of banking services in India and eventually, dealing in virtual currencies will come to a stake in this situation automatically. Though this affected the crypto market largely where people are not able to exchange through banks and were unable to transfer their currencies. Without access to the banking services even the regular operation was not accessible at all this was great trouble for the investors and traders of virtual currencies.

Though because of this action by the Government of India and RBI the crypto market was affected brutally and had a big hit eventually. The stakeholders and the investors with cryptocurrencies have to forcefully sell their cryptocurrencies and encash them in a fear to bear the heavy loss. Due to this hit sustaining was not that easy as one side crypto market was crashed in the heavy sale and reduces transactions and on another side due to loss over all the banking services. Bearing this treat a petition was filled in the Supreme court by the members of the Internet and Mobile Association of India on May 15, 2018, against the Reserve Bank of India for the legalization of virtual currencies in the country.

Though as said after every night there is a bright shiny day awaiting. This bright day in the world of Cryptocurrency was January 2020, when the RBI and government of India had unauthorized the ban on cryptocurrencies and legalized the trading of virtual currencies in the country. The cryptocurrency market was reopened for all the traders and investors and presently people restarted to show their interest in virtual currencies due to the pandemic. Though pandemic had shown a boom in the crypto market where people were now digitalizing their time.

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