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In presenting the country’s budget plan for 2018 today, Indian finance Minister doubled down on refusing to recognize cryptocurrencies like bitcoin as legal tender amid talk of a wider crackdown on their usage.
Speaking at the Indian Parliament while presenting the Union Budget 2018-19 today, India’s finance minister Arun Jaitley said:
The Government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system.
The finance minister’s declaration comes a little over a month after the country’s Ministry of Finance cautioned the public against investments in cryptocurrencies, likening them to ponzi schemes.
Still, today’s remark is primarily a rehash of what we already knew of the government’s stance on cryptocurrencies. While the statement is likely to cause concern among adopters and investors of cryptocurrencies, Jaitley made no mention of an explicit ban on bitcoin or any other cryptocurrency.
Further, any clampdown on the usage of cryptocurrencies as payment instruments does not forbid adopters from trading them on cryptocurrency exchanges. Indeed, the finance minister made no suggestions toward any ban on cryptocurrency exchanges orcryptocurrencies outright.
While bitcoin-friendly restaurants and other local establishments accepting the cryptocurrency might be forced to stop, there is no indication of any curbs upon buying and selling of cryptocurrencies through exchanges.
Developing…CCN has reached out to domestic exchanges for comment. This article will be updated upon receiving a response.
Video credit: Coincrunch.
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The Korea Customs Service (KCS) has revealed an investigation into illicit Forex trading practices, and uncovered $600 million (637.5 billion won) worth cryptocurrencies that were exchanged illegally in South Korea.
The statement further disclosed four instances of illegal tradings. In the first case, money was transferred from Japan to an unknown country whereby 53.7 billion won were sent to another person/entity using cryptocurrencies. In the second case, funds worth 472.3 billion Korean won were exchanged between Australia and South Korea. KCS explained that transferring funds between countries with the sole purpose of avoiding bank and remittance fees is considered illegal.
In the third case, foreign currency was sent to an overseas organization (as cryptocurrencies) which were then converted and remitted to the recipient. In the fourth case, funds worth 164.7 billion won were received by a paper company, citing ‘purchase of software’ as a coverup. KCS mentioned that it will start investigating cryptocurrency agents and forex operators for money laundering and illegal trading charges. Other areas that will undergo critical inspection include smuggling of drugs using virtual currencies. The names of the suspects were not revealed in the press release.
The announcement came on the same day the finance minister, Kim Dong-yeon, said that cryptocurrency market and exchanges will not be banned in the country. Instead, South Korea will be focusing on regulating cryptocurrency exchanges. The country has been working on adopting cryptocurrencies, after the ministry of justice initially banned ICOs last year. The ministry also stated that it would be banning cryptocurrency trading earlier in January. However, this move was not supported by the Ministry of Finance, as reported in their official statement, “We do not share the same views as the Ministry of Justice on a potential cryptocurrency exchange ban.”
While the majority of the ministries continue to support cryptocurrency activities, the South Korean government is doing its best to prevent illegal trading proceedings.
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It appears to be the end of the road for cryptocurrencies in India.
Finance minster Arun Jaitley, in his budget speech today (Feb. 01), stated that the government will do everything to discontinue the use of bitcoin and other virtual currencies in India. He reiterated that India does not recognise them as legal tender and will instead encourage blockchain technology in payment systems.
“The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system,” Jaitley said.
This declaration comes after months of speculation over the fate of cryptocurrencies in India, home to a large number of bitcoin traders and investors. In fact, one in every 10 bitcoin transactions in the world takes place in India.
“The government will now either come out with a legislative mechanism or make suitable amendment in existing legislation to ensure that dealing and trading in cryptocurrency is made illegal and to penalise entities and individuals who are involved in their trade and circulation,” said Monish Panda, founder of Monish Panda & Associates law firm. “We will have to wait and watch as to what will be the final framework of such legislation.”
Over the last few months, the government and the Reserve Bank of India have repeatedly expressed their discomfort over bitcoin and other e-currencies. Late last year, the finance ministry dubbed them a ponzi scheme. “There is a real and heightened risk of investment bubble of the type seen in ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money,” the ministry had said. “Consumers need to be alert and extremely cautious to avoid getting trapped in such ponzi schemes.”
At the same time, the Narendra Modi government had also announced the setting up of committee to understand the implications of virtual currencies, and to ascertain the worldwide regulations surrounding them.
Jaitley’s stance today should now put to rest doubts over the government’s approach.
Other countries, too, have been jittery in this regard. For instance, in January China was reportedly preparing to widen its crackdown on cryptocurrency trading. Nonetheless, Indian cryptocurrency exchanges held out hope, arguing that the government would maintain some balance in its regulations.
Read next: India’s government wants to kill bitcoin, but it loves blockchain
During the last days of January, the price of a single bitcoin generally moved sideways, as financial leaders at the World Economic Forum in Davos discussed how governments around the world should regulate the cryptocurrency. After achieving a local high of close to $12,000 on Sunday morning, bitcoin's price dropped significantly.
Coming into February, the price of a single bitcoin was down significantly. As of 13:34 UTC today, one bitcoin was selling for $9,381.41, the lowest price for a single BTC so far in 2018. Some analysts have predicted further drops in the immediate future.
Ethereum, the No. 2 cryptocurrency by market cap, is the only one of the 20 largest digital currencies in the world to post gains over the past 24 hours, and those gains are meager at best. Over the past 24 hours, ethereum's value climbed by just 1.74%, reaching $1,136.91 by 13:34 UTC today. While this constitutes a relative gain over yesterday, it is nonetheless shy of ethereum's high point for 2018 so far.
On January 15, ETH reached as high as $1,389.18 in a brief surge. Volatility in the market may be linked to news from South Korea, where the government is still clarifying its position on cryptocurrency trading going into the new month. (See also: Why Is South Korea So Important to Bitcoin Prices?)
Ripple remains under pressure, having a difficult time settling at any support level. As of 13:34 UTC, XRP dropped to just $1.01 per coin. At this time roughly a month ago, XRP traded for about $3 per coin.
Earlier in the week, financial institutions made a case for XRP, although investor enthusiasm did not last long. Going into February 1, the value of XRP is down by 13.97% over the past 24-hour period, perhaps due in some part to news out of India that the government there will no longer consider cryptocurrencies legal tender.
Among the top 10 cryptocurrencies, ethereum is the only one to post gains over the past 24 hours. The biggest decline as percentage of total value was Cardano, which fell by 16.91%, followed by Stellar, which fell by 16.18%.
The cryptocurrency markets were valued at $469.2 billion as of 2:00 p.m. UTC today. As of Tuesday of this week, they were valued as high as $570.4 billion.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns cryptocurrencies.
