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India May Legalize Cryptos But Under ‘Strong’ Rules: Report

The Indian government could possibly legalize cryptocurrencies, but with tough terms and conditions attached, a news report suggests.

According to a New Indian Express article published Wednesday,  an interdisciplinary committee set up by the government to investigate cryptocurrencies, is not in favor of an outright ban.

An anonymous senior official who attended the committee’s meetings told the newspaper:

“We have already had two meetings. There is a general consensus that cryptocurrency cannot be dismissed as completely illegal. It needs to be legalized with strong riders. Deliberations are on.”

The government set up the committee in April 2017 with the remit of examining the existing legal framework related to digital currencies and suggesting new measures to deal with the technology, including addressing issues around consumer protection and money laundering. Members include representatives from government departments for the economy and taxation, as well as the central bank and other agencies.

The second iteration of the group is now reportedly expected to submit its new report to the country’s finance ministry by February 2019.

The article apparently indicates a softening of stance by the committee, which, back in October, recommended that the government develop an “appropriate legal framework to ban the use of private cryptocurrencies in India.”

Further dampening the country’s cryptocurrency industry amid confusing messages over the legal status of bitcoin and its crypto peers, an April order by the Reserve Bank of India, India’s central bank, prevented domestic banks from providing services to cryptocurrency firms such as exchanges.

Since then exchanges have been seeking ways to keep their businesses from failing, entering legal petitions to overturn the RBI ban at the country’s supreme court. Seeking guidance, the court, on Oct. 26, asked the government to provide its opinion on cryptocurrencies within two weeks.

While, no official announcement has yet been made to provide guidance, that situation looks likely to change in coming months.

With India a member nation of the G20 group, any rules to govern the local crypto space may be influenced by planned regulatory guidance from the international economic forum, the report adds.

The official told the New Indian Express:

“We have also taken inputs from cryptocurrency exchanges and experts and will be examining legal issues with the law ministry. It’s a complicated issue. Once all aspects are decided, then we will have more clarity.”

Bitcoin and Indian rupees image via Shutterstock 

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Singapore’s Stock Exchange Clarifies Rules for Listed Firms Issuing ICOs

Singapore Exchange (SGX) has clarified the rules for publicly listed companies planning to conduct initial coin offerings (ICOs).

In a column published Thursday, Tan Boon Gin, CEO of the stock exchange’s regulatory subsidiary, SGX RegCo, stressed that any tokens launched in an ICO are not listed on the SGX and that these rules are applicable only for the companies themselves.

As per the guidelines, any listed company planning to hold an ICO is required to consult with SGX RegCo in advance, as well as provide a legal opinion on the nature of tokens and an auditor’s opinion on how the ICO should be treated for accounting – both from “reputable” firms.

Companies are also required to make certain disclosures, including the rationale behind the ICO, the risks involved, how the raised funds would be used, planned know-your-customer (KYC) and anti-money laundering (AML) checks, and any impact on existing shareholders’ rights.

They also need to ensure that ICOs are “properly” accounted for in their financial statements and that associated risks have been addressed.

Further, if the tokens are considered securities under the country’s Securities and Futures Act (SFA), issuers are required to complete prospectus registration and licensing procedures. Firms may also be required to form a subsidiary to carry out the ICO.

Finally, SGX RegCo expects listed issuers of ICOs to “safeguard” their own interests and that of shareholders. “The issuer’s board is ultimately responsible for maintaining a robust system of risk management and internal controls,” Gin said.

Back in August, Y Ventures Group became Singapore’s first public firm to hold an ICO, which aimed to raise $50 million for creating a blockchain-based e-commerce system.

To date, however, no token considered a security has been approved in the country by the Monetary Authority of Singapore (MAS), as Damien Pang, head of the MAS technology infrastructure office for fintech and innovation, told CoinDesk at a Consensus conference in September.

SGX image via Shutterstock 

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What China’s Cashless Revolution Can Teach the West About Crypto

Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.

Cash appears to be disappearing from China’s teeming cities.

Foreign tourists talk of struggling to buy things because they don’t have Alipay or WeChat Pay installed on their smartphones and because merchants no longer bother to accept the banknotes they get from ATMs.

These stories elicit fascination among Americans, but not much more. Here in the U.S., many can’t grasp what the big deal is about digital payments. After all, pulling a credit card from your wallet isn’t much more inconvenient than pulling a smartphone out of your pocket and it costs you – if not the merchant – no more than if you used cash. To the average American, China’s system seems no different from Venmo or Paypal, just more pervasive.

But as Andreessen Horowitz partner Connie Chan told me during a fireside chat at the HYTSA conference at Stanford a week ago, the real benefits of China’s cashless revolution lie in how this new, software-based system of value exchange has become a platform on which new business models can be built.

Digitizing payments in this way, at very low cost, enables micropayments and seamless integration across different service providers, which in turn means merchants can provide a variety of new services to customers over an app. This helps to enhance the user’ experience, boost loyalty and engagement, and build network value.

Consider how Kuguo, the most popular of a number of Chinese music apps, provides “song coins” to fans, based on their level of engagement, which they can exchange into renminbi, the local currency.

Essentially, by removing intermediation costs from the payments system, Alibaba affiliate Ant Financial’s Alipay and Tencent’s WeChat Pay – which together now boast a billion users, according to Aite Group – have created a seamless foundation for a whole new digital economy. Chan says this is where U.S. app developers are being left behind, because their products can’t integrate with this new model.

The relevance in this for CoinDesk readers, with their interest in cryptocurrency and blockchain technology, starts with the fact that this dream of a seamless, micropayments-enabled system of hitherto impossible new services is one that’s often cited by crypto enthusiasts.

So, does China prove that you don’t need a blockchain to build a new Internet of Value, powered by device-to-device exchanges in an Internet of Things economy?

Well, yes, and, no.

Crypto dream, Chinese characteristics

There is a very real and illuminating limit to China’s system: It can’t easily go outside its borders.

Although some U.S.-based providers are now creating services for Chinese tourists so they can buy things in America with their WeChat Pay or Alipay accounts, most of the activity on these networks happens in China. Most importantly, while Alipay and WeChat Pay are trying to crack other markets, there is no cross-currency facility. For all intents and purposes, this “cashless revolution” is happening within the boundaries of a renminbi universe.

The reason for that is that unlike cryptocurrency systems, the Chinese digital payments system is entirely built on the rails of the Chinese banking system, which deals almost exclusively in the Chinese currency. In that sense, it does share a foundation more like Venmo’s and Paypal’s, whose accounts also settle back into the banking system, than that of bitcoin or other cryptocurrencies.

The big difference is that for a host of reasons, the banks don’t charge the same kind of exorbitant interchange fees to Chinese merchants that U.S. banks do to U.S. businesses, allowing the digital payments providers to build a much more fluid micropayments model on top.

But here’s the thing: the Chinese banking system is essentially an instrument of Chinese policymaking. The four biggest banks make up the bulk of the financial system and are all majority government-owned. Their capacity to make profits, essentially on the spread they charge for loans over what they pay for deposits, is enabled by a carefully managed monetary policy. The People’s Bank of China sets a ceiling for deposit rates – often below inflation – and can get away with that because it imposes capital controls on savers to prevent them fleeing low rates for higher-earning currencies.

To be sure, Ant Financial and Tencent both have a variety of financial and banking licenses of their own. But their own financial profits are very much enabled by the same interest rate policy framework that a wider state-run Chinese banking system is compelled to accept.

For now, that policy framework has sustained a quid pro quo arrangement with Chinese savers, who more or less support a banking system that otherwise eats into their savings because the benefits are manifest in continued economic growth and in services like those of Tencent and Alibaba.

But for some time, there has been an expectation that China, in its desire to “internationalize” the renminbi, will relax both its interest rate and capital controls, which could seriously undermine banks’ profit margins. If China were also to allow more private and foreign investment into the banks, would those institutions continue to subsidize the digital payments economy? Maybe, maybe not.

Since we can’t be like China, maybe embrace crypto?

The bigger point is that China’s circumstances are unique. There aren’t many governments, if any, that could get away with this kind of control over the banking system. Others have tried – such as Venezuela and Argentina – and have destroyed confidence in their currencies in the process.

So, if the rest of the world can’t use compliant banks to subsidize a fluid, digital payments system, what instead will it use as the platform?

The answer may well lie in cryptocurrency and blockchain-based protocols. And as the race to build a stablecoin proceeds, a foundation for something that could viably compete with China’s model may emerge. It might even go one step better, as it would allow for cross-border payments.

As U.S. government officials look nervously across the Pacific at China’s growing economic clout, rather than launching destructive trade wars that do nothing but prop up outdated, 20th-century industries, they should instead be figuring out how to emulate and compete with China’s new Internet of Value model for business development and innovation.

It’s in that context that they should be looking at cryptocurrencies and blockchain technology less as a threat and more as an opportunity.

Cashless payments in China image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Cryptojacking Scripts Found on Local Indian Government Sites

Official government websites in India ran cryptomining scripts without their owners’ knowledge, the Economic Times reported Monday.

Municipal government websites in the state of Andhra Pradesh, among others, were infected by cryptomining software such as Coinhive, security researchers found. Users visiting these websites would then inadvertently mine cryptocurrencies on behalf of the hackers who injected the scripts in the websites originally.

The process is called cryptojacking, as the malicious scripts essentially hijack a user’s computer to mine cryptocurrencies.

Security researchers Shakil Ahmed, Anisha Sarma and Indrajeet Bhuyan discovered the vulnerabilities, finding that three of sites running cryptojacking malware belonged to the subdomain, which sees 160,000 hits every month, according to the report.

Bhuyan told the Times that government websites are popular targets for malicious actors, saying:

“Hackers target government websites for mining cryptocurrency because those websites get high traffic and mostly people trust them … Earlier, we saw a lot of government websites getting defaced (hacked). Now, injecting cryptojackers is more fashionable as the hacker can make money.”

Andhra Pradesh’s IT secretary did not respond to a request for comment from the Times, though the state’s IT advisor to the chief minister, JA Chowdary, said “thanks for notifying us about the AP website hacking,” on September 10, according to the report.

Despite acknowledging the cryptojacking malware, the websites continued to run the scripts as of September 16, the Times noted.

It is unclear how long each website ran cryptojacking software, or how much cryptocurrency was mined for the attackers.

Stone Buddha image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Indian Central Bank Argues Cryptos ‘Not Valid’ as Currency in Court Battle

The Reserve Bank of India argued Wednesday that bitcoin cannot be recognized in the country before the nation’s Supreme Court.

In a case that has been brought by a number of exchanges against the Indian central bank for blocking their access to banking services five months ago, the RBI stated in an affidavit that current legislation means that cryptos cannot be considered either currency or money.

The RBI stated:

“It is submitted that crypto-currencies fall short of being true currencies. It is further submitted that RBI does not consider virtual currencies such as Bitcoins as ‘currency’ under the extant laws. There are no enabling provisions under the extant law to treat Bitcoin as currency.”

Further, according to a report from CNN’s News 18, the RBI continued to say that, as cryptos are peer-to-peer networks and not controlled by a service provider, “They can’t even be considered as a valid payment system.”

In order to be recognized as a “valid currency” the bank said instruments should “possess identical or similar characteristics of cheques, postal orders and money orders.”

The next hearing on the case is scheduled for September 17, the news source indicates.

Back in April, the central bank ordered domestic banks and financial institutions to stop working with the country’s crypto exchanges within three months.

Later that month, a petition was lodged against the RBI by Kali Digital Ecosystems, an Indian firm that had been planning to launch an exchange called CoinRecoil in August.

According to the text of the petition, Kali was seeking “an appropriate writ, order or direction quashing the [RBI’s] circular.” It stated that the ban is “arbitrary and unconstitutional” and that the company is unable to begin operating due to the RBI’s restrictions.

The issue has since addressed by petitions from other exchanges seeking to overturn the ban, which the Supreme Court is hearing at the same time.

Since the RBI circular was issued, exchanges have been forced to drop rupee-to-crypto trading services, relying instead on crypt-to-crypto trading. However, trading volumes have taken a big drop and the companies face an uncertain future unless the court rules to overturn the ban.

Court room image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.