Speaking at the inaugural International Blockchain Congress held in India on August 4, 2018, Jaideep Reddy, a prominent Indian lawyer and crypto market advisory specialist, has criticised the anti-crypto stance of the Reserve Bank of India (RBI) which prevents banks from carrying out transactions with crypto-related entities.
Reddy stated that the hostile policy will not have the desired effect, but will instead drive the crypto economy underground and make the existing situation worse.
“Restrictive and Ineffective”
Reddy, who is Emerging Leader at Nishith Desai Associates, a law firm specializing in corporate and investment advisory services, delivered his message during a panel session on the topic “Way Forward for India Cryptocurrency Exchanges” on August 4, 2018. BTCManager earlier reported that the controversial RBI Circular sent shock waves through the Indian crypto space.
Giving his opinion, Reddy said:
“From a policy perspective if you look at what this step achieves is that it drives the whole market underground. When you say that people cannot transact in this industry through proper channels, what you are actually saying is that you have to buy it in cash and sell it in cash and as a result, all concerns that the RBI has stated — money laundering, consumer protection, and market integrity — the circular makes those concerns worse.”
The policy restriction, Reddy said, lays the framework for its failure by making the market hidden and opaque. Under such conditions he explained, there is an increased probability of malfeasance, poor record keeping, theft and money laundering. Unlike an underground cash market, he said, proper banking channels give regulators the ability to track revenue and examine transactions using the banks’ customer management framework.
He also stated that access to banking infrastructure will make it easier for authorities to raise tax revenue and that with a more nuanced and less heavy-handed approach by the RBI, it is possible to kill both compliance and revenue birds with one stone.
Suggestions for Indian Crypto AML and KYC
During the session, other speakers including Koinex co-founder Rahul Raj and Zebpay CEO Ajeet Khurana also shared their suggestions regarding how Indian regulators may successfully regulate the crypto industry to ensure compliance without strangulating it.
Ajeet Khurana also shared in the event while talking to Indian cryptocurrency enthusiasts that Zebpay is not interested in launching a p2p exchange because they are not efficient and the company is waiting for regulations sky to clear out. He also noted that he believes decentralized exchanges are the future and Zebpay is committed to protecting customer’s hard-earned money.
Koinex, on the other hand – has already launched Loop, a p2p crypto-fiat exchange in India. BTCManager in July 2018, published a tutorial on how to use Koinex loop.
One of these speakers was Uncoin co-founder Sathvik Swaminathan, who is using a unified set of identity verification standards to account for the source of funds in every transaction. In his words:
“Some of the exchanges have a policy in which, if the user exceeds an ‘X’ amount of rupees or bitcoin, then they will want to have an additional set of verification documents so that they know that the person is a high value, the high-risk customer. You will know what they want to do.”
The consensus among speakers and panelists was that cryptocurrency is misunderstood as a competitor to the Rupee by Indian authorities, whereas it is not a currency under the Indian legal definition of the term. According to them, crypto is a regular asset class that is neither currency nor a derivative, much like a market traded commodity.