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How does the Indian cryptocurrency exchange work

12/07/2018
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In different countries, the regulation of the turnover of digital financial assets has various features. In this series, any cryptocurrency exchange India is in a difficult position. Not only the legislation is not developed here, but in this country, significant obstacles to development are being put.

Blockchain and Central Bank Conflict

Since the advent of Bitcoin, its main opponent has been Central Banks. The new principle of financial turnover has infringed upon their exclusive right to issue money. But after an in-depth study of the issue, most of them learned to work in the new conditions.

They created regulations that allowed to put the situation under control and provide investors with transparency in conducting operations. Most often for this purpose, they used the norms applied for traditional institutions - exchanges and banks. It is on this path that the authorities of the USA and Japan went. Of course, these rules were amended and corrected, but in these countries, the trade in cryptocurrency has acquired civilized features.

The situation was similar in India. But that all changed in April 2018. It was then that the Central Bank issued an ambiguous document. According to it, credit institutions were forbidden to cooperate with cryptocurrency exchanges. The result of this was the fall in demand for bitcoin and other coins. Trading platforms have lost the ability to conduct legal activities in the country.

What are the results of the ban

As always happens in such cases, service providers are divided. Those who conducted activities in strict accordance with the law turned down their work. Thus, the largest cryptocurrency exchange in India, Zebpay, stopped serving Indians in the country. It opened offices in Malta and in Malaysia. Some exchanges have moved from the legal field to a semi-legal position.

This situation only worsened the position of customers. As a result, they still continue to buy and sell digital coins, but at the same time:

  • on less favourable terms;
  • their rights are not protected by the state;
  • novice investors are at increased risk;
  • A significant part of operations is carried out outside India.

Cryptocurrency exchange repeatedly appealed to the judicial authorities, but could not succeed. Back in July 2018, the country's Supreme Court will issue a resolution on the legality of the decision of the Reserve Bank of India. This is the highest authority that could change the situation for the better. And it decided not to intervene in this conflict.

What will happen next with the cryptocurrency in India

The government understands that the uncertain situation lasts too long. Therefore, in November 2018, Subash Chandra Garg, head of the economic department of the bank, delighted the community. He said that a package of laws on cryptocurrency in India would be adopted before the end of the year.

However, it is not clear what exactly will be written in them. The official said that the department had advanced very far along the path of studying the blockchain, and is now ready to form its position.

So far, it remains only to guess what will be said in the new law. So far it is clear only that the Indian cryptocurrency exchange will begin to exist in the legal field. This can already be called significant progress. According to business representatives, due to the protracted uncertain situation, the development of financial technologies has been inhibited. It is noteworthy that even the Reserve Bank was unable to state the reasons for the ban. Therefore, we hope that the situation will soon get out of the impasse.

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