Straight to the point. Today Cabinet approved a new Bill to “Ban Unregulated Deposit Schemes and Chit Funds (Amendment) Bill”, 2018.
And as I had hoped the headlines like “Ban on Ponzi like cryptocurrency” started popping up faster than I can write the name of the bill. I am going to save my hatred for the mainstream media for now. For now, let me explain how this does not mean a ban on Cryptocurrency or Cryptoassets.
What is bill?
You can read it yourself or read further of our own analysis. The PIB release talks about 2 important bills getting nods from the cabinet.
- The Banning of Unregulated Deposit Schemes Bill, 2018
- The Chit Funds (Amendment) Bill, 2018
We currently do not care about Bill #2. Let’s get to the first one.
The Draft of the Bill was presented in 2016. What they essentially want to do is apply a blanket ban on unregulated deposits. That is GOOD.
Some of the important take-aways from the bill:
- complete prohibition of unregulated deposit taking activity;
- deterrent punishment for promoting or operating an unregulated deposit taking scheme;
- stringent punishment for fraudulent default in repayment to depositors;
- listing of Regulated Deposit Schemes in the Bill, with a clause enabling the Central Government to expand or prune the list.
Focus on #4. The government has a list of Regulated Deposit Schemes and can add more later.
Will this Ban cryptocurrency?
The simple answer is NO, but let me explain further.
Let us understand what a deposit is first. Here’s the definition of deposit from the bill.
‘Deposit’ means the receipt of money, by way of advance or loan or in any other form, to be returned, whether after a specified period or otherwise, either in cash or in kind or in the form of a specified service, by any Deposit Taker, with or without any benefit in the form of interest, bonus, profit or in any other form.
Here’s the definition of “Unregulated” deposit from the bill.
‘Unregulated Deposit Scheme’ means a scheme or arrangement under which deposits are accepted or solicited by any Deposit Taker by way of deposit taking business, and which is not a Regulated Deposit Scheme.
This leaves us to determine whether the deposit you make to the exchanges fall into the “Regulated” category or “unregulated” category.
What are Regulated Deposits?
The list of regulated deposits is long, but the list of regulators isn’t. Any deposits under these regulators are regulated.
- Securities and Exchange Board of India
- Reserve Bank of India
- The Insurance Regulatory and Development Authority
- State Government
- National Housing Bank
- Pension Fund and Regulatory Authority Act
- Employees Provident Fund Organisation
- Central Registrar, Multi-State Co-Operative Societies
- Ministry of Corporate Affairs, Government of India
Theoretically speaking we don’t know how the exchanges are regulated right now and under what act are they collecting deposits. Exchanges have been silent about this. We know some companies are able to accept deposits under another business head like Bitbns’s BuyHatke or Coinome’s Billdesk or Hatio.
We cannot determine that Deposits are regulated or not, but that still doesn’t make Cryptocurrencies illegal or banned.
What if Exchanges are accepting Unregulated Deposits?
If they are, they will have to change that. Just because the bill is approved today doesn’t mean that exchanges will be asked to not accept deposits right away. They have to provide proofs to ensure that everything is done legally. These exchanges have advisors, lawyers and industry experts backing them. They will do everything in their power to keep their companies running.
What is the Worst Case Scenario?
Worst case scenario is that exchanges will stop accepting INR Deposits. That still doesn’t mean Crypto is banned. You will still be able to buy Cryptocurrency from P2P exchanges, where you will have to transfer money to a seller’s bank account directly. There is no law against it.
Are you sure Crypto is not banned?
Yes. There is no regulation on Crypto yet and it is not banned.
Watch this space: