Indian Prime Minister Narendra Modi has promised to use technology to accelerate national development and spur growth by making government more transparent and innovative. He promised to overhaul health care policies, banking and government services, and even announced that he would partner with Google to provide Wi-Fi at 500 train stations across the country.
However, it seems that the authorities have forgotten about innovation after the rapid growth in popularity of cryptocurrencies. In May 2017, India accounted for almost 10% of all cryptocurrency transactions in the world.
Then the Central Bank of India decided to prohibit banks from dealing in cryptocurrency. The new rules, which come into effect on July 5, effectively prevent traders and investors from using India's regulated banking system to buy or sell virtual currencies for rupees, forcing companies and investors to either shut down operations and move to other countries or turn to the illicit "dark sector."
“We use bank accounts for our operating expenses and salaries. This means that we simply have to find a bank elsewhere,” say users and companies who do not want to agree with such regulation and are ready to sue the regulator.
Cryptocurrency sector specialists call the actions of the Central Bank of India striking an example of a burdensome bureaucracy that can stifle innovation.
“The government felt that it was losing its power over the system and did not want to simply give up control of cryptocurrency and exchanges,” says Avenis Rajan, co-founder and executive director of the cryptocurrency exchange derivatives trading, which will soon open in Estonia.
The central bank has also said that it is exploring the possibility of creating its own digital currency, but critics are hoping that the government will change its mind and come up with something new, something like a tax, which would be more acceptable than a parallel cryptocurrency economy.
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