Thread by @SinoGlobalCap

India Regulatory Update

Commentary by @YourstrulyVish & @sentience420

DISCLAIMER: The regulatory update is based on the news reports by @ndtv and @Sonal_MK They have based their story on the cabinet note that is yet to be presented. The Cabinet is expected to meet next week. They are the only source of information currently.

1. There will be no ban on private cryptocurrencies.

The Indian Govt has chosen to take a middle path in this regard and is a welcome step by the Indian crypto ecosystem.

2. The priority of the government is to ensure crypto doesn't start an underground economy post “ban”.

3. Under the proposed legislation, cryptocurrencies could be renamed as crypto-assets.

4. Crypto assets will be regulated through Indian exchanges by the Securities and Exchange Board of India (SEBI). (Likely modelled around current stock market regs).

5. All crypto assets needed to be declared and transferred to Indian exchanges. Citizens will not be allowed to keep crypto on foreign exchanges or..

..private wallets (non-custodial wallets). This is the most worrisome aspect of the note. Commentary below.

The Indian Govt here wants to ring fence the exchanges and then tax the trades.

6. There is going to be a cut-off date to declare all crypto assets and transfer them to Indian exchanges. Declaration post cut-off date likely to have a penalty between 5 Crore to 20 Crore Rs (600k to 2.5 Million USD).

7. Individuals will be prohibited from mining, generating, holding, selling, dealing in issue transfer, disposing of or using cryptocurrency as a medium of exchange or unit of account.

8. CBDC will be issued, governed and monitored by the Central bank i.e. RBI. RBI’s digital currency will not be part of the present Cryptoasset Bill.

9. As a deterrent for those found using crypto for terror related activities, the provisions of the Prevention of Money Laundering Act (PMLA) will apply with suitable amendments.

Commentary on Point 5.

If it is included, it is likely to be challenged in court by crypto supporters, they will likely argue that it infringes upon certain fundamental rights.

Examples of where it may so infringe:

1. Article 19(g) of the constitution (FREEDOM TO PRACTISE ANY PROFESSION, OR TO CARRY ON ANY OCCUPATION, TRADE OR BUSINESS).

Even though the constitution allows reasonable restrictions, it seems to curb this right for developers, gamers, NFT artists etc, as it is crucial for..

..the above professions to have a non-custodial wallet, hence may fall in the unreasonable category. Developers need a wallet to test the code even on a devnet. The artist needs to use a wallet to mint..

..an NFT, and P2E games need a non-custodial wallet. This fundamental point seems to be missed based on the details reported.

2. Article 21 contains : Right to Livelihood.

Here it seems to infringe upon certain professions such as smart contract development, the livelihood of developers in this industry requiring..

..them to have a non-custodial wallet. This is likely for an NFT artist too, as it's essential to have a non-custodial wallet to earn their livelihood.

Final thoughts.

We advise users to wait for the final cabinet note to be approved and the draft bill be published in public domain.This would provide much needed clarity from the Govt side. From banning in..

..February to regulation at present, the ecosystem has gone through a roller coaster ride. These moves are positive and in the right direction.