After SC’S crypto ruling, experts for regulation
Otherwise, dubba trading will continue to flourish
As crypto exchanges in the country gear up to relaunch trading after last week’s Supreme Court judgment, many industry experts are calling for regulation to check misuse and bring all trades on record. The absence of regulation and lack of facilities to invest through the normal channel have resulted in dabba trading (illegal trading) flourishing.
As crypto exchanges in the country gear up to relaunch trading after last week’s Supreme Court judgment, many industry experts are calling for regulation to check misuse and bring all trades on record.
The absence of regulation and lack of facilities to invest through the normal channel have resulted in dubba trading (illegal trading) flourishing.
Some big cities, including Ahmedabad and Surat, have seen a sharp rise in dabba trading. Banning it will ensure use of more illegal channels.
In last two years, after the Reserve Bank of India (RBI) banned banks from trading in cryptocurrencies, illegal channels have prospered.
Prior to April 2018, several exchanges dealing in cryptocurrencies, including bitcoin, were active. They were offering mobile app-based investment and trading after fulfilment of KYC. Also, fund transfer was offered through banking channels.
However, soon after buying-selling of cryptos via hard cash, transfers through one-to-one contact between investors were prominent.
Often, exchanges offer peer-to-peer contact between buyers and sellers. These exchanges only transfer the bitcoins without bothering about what the mode of payment. The bourses have no mechanism to check whether deals are unaccounted or accounted money.
Naveen Surya, chairman emeritus, Payment Council of India and the current chairman of Fintech Convergence Council, under the Internet and Mobile Association of India, which also represents interests of the cryptocurrencies industry, said, “We need regulations for the crypto industry in India. We have been discussing what self-regulatory measures the industry can implement without waiting for government regulations. These regulations shall include that no leverage or credit-based investment would be permitted. Issues like stricter KYC for investors, responsibilities for exchanges or service providers, margins and fees need to be addressed.”
A leading crypto industry official said, “the Union finance ministry informed industry representatives after the Supreme Court judgment that it will have discussions with them after studying the SC order.” Till the time the government’s approach is known, Surya advised investors to apply caution in
dealing with cryptocurrencies.
So far, the view of the government is to ban cryptocurrencies in the country. The bill proposing ban on cryptocurrencies was introduced in February 2019 in Parliament during the Modi government’s first stint.
Sidharth Sogani, founder and chief executive officer (CEO) of CREBACO Global Inc, a leading research and intelligence firm that focuses on blockchain and crypto projects, said, “The Supreme Court judgement last week permitting cryptos doesn’t necessarily make them legal. The crypto industry is a completely new financial ecosystem. The existing legal frameworks may not apply without any update. The government will have to keep on updating regulations for cryptos.”
Sogani has already proposed regulations for crypto currencies in India to the government.
He said there has to be a separate regulator in India for cryptos. There could be a new department, say, the Digital Asset Regulatory Authority, to regulate crypto and other digital assets in India. Other areas that need regulatory clarity are taxation issues, technology used, fundraising, norms for setting up exchanges and so on.
All these are necessary because, in the last two years, crypto trading and investments have shifted from the banking channel to offline. Bitcoin prices have moved from near $20,000 two years ago to $3,000 in 2019. They again climbed to $10,000 but has now fallen below $8,000 per coin.
Many dubba operators use CME bitcoin futures as base to determine the rupee price.
Exchanges have either shifted overseas or are offering peer-to-peer trading. Investors have made payments through cash, bank transfer and even payment apps.