MUMBAI, India — “Can’t take this sitting down anymore,” Sandeep Nailwal, co-founder of Ethereum-compatible blockchain network, Polygon, tweeted recently.
“I am going to run a Covid relief campaign in lieu of what’s going on in India. Need help from the global crypto community
Knowing fully well the nebulous regulatory stand in India on anything to do with cryptocurrency, Nailwal said, “I will take full responsibility for transparency, funds usage, and regulatory compliance.”
India is dealing with a deadly second wave of Covid-19. On April 30, daily cases crossed the 400,000-mark, and the numbers haven’t dipped below 350,000 cases since. India’s healthcare system is stretched beyond all limits.
As citizens take to Twitter to help each other, crypto and blockchain enthusiasts also came together to do their bit.
After Nailwal posted that tweet, he followed it up with a Google Form for secure donations to reach prospective crypto donors.
A website, CryptoRelief.in was also set up by Nailwal and his core team members. According to the latest statistics shown on the homepage, the initiative has collected over $3 million worth of cryptocurrency. To keep things transparent, Crypto Relief has an audit of all the transactions.
When it comes to regulations on cryptocurrency, the Indian government has had a conflicting stance.
In its official documentation regarding the 2021 Bill, the government states: “The Bill also seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
According to Naresh Jain, co-founder and chief operating officer of blockchain firm Snapper Future Tech, crypto has neither been authorized nor regulated by any central authority in India.
“There is no regulation related to cryptocurrency-based donations in India, and so receipt of any donation for Covid-19 relief work in the form of cryptocurrencies cannot be charged under any law,” Jain told Zenger News.
Nailwal and his core team members have created a Discord messenger group where, apart from adding new volunteers to the team, CryptoRelief is verifying SOS updates that are being shared on social media channels.
The Discord group almost looks like the working group inside an organization with channels such as ‘working committee’, ‘design marketing’, ‘fundraising’, ‘equipment sourcing’, and much more. A ‘resources’ link points one to various India-focussed Covid-19 resources.
“We are a team of 100+ volunteers who have come together to provide relief by working directly with hospitals, non-governmental organizations (NGOs), and other organizations dealing with Covid,” Ajay Dhillon, partnerships and volunteer management at CryptoRelief, told Zenger News.
The initiative has also got assistance from blockchain communities such as Ethereum, Polygon, Cosmos, and Lastbit, to name a few.
The team is coordinating with the biggest suppliers of medical items in India, manufacturers, Foreign Contribution Regulation Act-compliant NGOs, hospitals, doctors, state governments, and the Indian embassy in Kuwait, according to Dhillon.
Former Australian fast bowler Brett Lee donated 1 BTC (bitcoin) to the Crypto Relief fund, which is over $50,000 worth in fiat currency. The co-founder of Ethereum protocol, Vitalik Buterin, also donated 100 Ether ($328,887) to the initiative.
Popular Indian cryptocurrency exchange CoinDCX has also begun a Covid-19 relief page and has tied up with Indian online crowdfunding service Ketto for relief activities.
“At CoinDCX, we have collaborated with industry players and started the Crypto Covid Relief Fund, which invites donations in the form of cryptocurrencies that will aid in oxygen supplies, food expenses for vaccinations and affected patients, among others,” Sumit Gupta, chief executive and co-founder of CoinDCX, told Zenger News.
“All the contributions will get converted into INR and be transferred to our NGO partners and other organizations who have been backing this initiative,” said Gupta.
Crypto exchanges and their founders have called for the regulation of cryptocurrencies in the country.
“In its judgment, Internet and Mobile Association of India vs. Reserve Bank of India, dated March 4, 2020, the Supreme Court set aside the crypto ban notification,” said Akram, who handles supply diligence at CryptoRelief.
“However, direct conversion of cryptocurrency to INR is still a grey area as the order does not completely deal with other regulations such as Foreign Contribution Regulation Act, etc.”
Cyberlaw expert and head of fintech policy at Cashfree, Asheeta Regidi, notes that donating cryptocurrency isn’t illegal.
“Crypto exchanges operate with self-imposed know-your-customer norms to be compliant even though the norms do not apply to them directly,” Regidi told Zenger News.
“Hence, completely anonymized cryptocurrency donations may not be possible.”
A problem can arise if the donations are coming from outside India and the beneficiaries are NGOs. In India, NGOs accepting foreign aid are regulated by the conditions set by Foreign Contribution Regulation Act.
Regidi notes that NGOs don’t directly accept cryptocurrency as donations. “Currently, the applicability of the Foreign Contribution Regulation Act to cryptocurrencies is ambiguous,” said Regidi.
“There may be scope to structure a cryptocurrency donation within the ambit of this law since the Foreign Contribution Regulation Act also applies to the donation of ‘articles of value’.”
To illustrate this, Regidi says if, say, a cryptocurrency is recognized as a currency/security in a jurisdiction from where it’s coming, there could be scope for the contribution to be structured as foreign currency/security.
“But this is tricky and needs more analysis. Given the lack of clarity, crypto donations are following a system of being converted to fiat currencies in crypto exchanges abroad and being donated thereafter in INR to Foreign Contribution Regulation Act-approved NGOs,” Regidi said.
Akram concurs and notes that Crypto Relief only donates funds to Foreign Contribution Regulation Act-registered NGOs.
“We are not converting cryptocurrency to INR directly in India.”
Another regulation that one needs to look at is the Foreign Exchange Management Act, which has restrictions to remit assets in terms of funds in or out of India.
“As cryptocurrency transactions are digital and there is no trail of receipts, it is difficult to say whether the cryptocurrency is coming from India or abroad,” said Jain.
“In the absence of regulations, an NGO can receive cryptocurrencies and declare all the receipts in Indian rupees after converting crypto assets on exchanges. However, any NGO receiving donations in cryptocurrencies should seek clarity from the government department,” said Jain.
CryptoRelief ensures that while it works with multiple NGOs, the direct foreign remittance is done only to Foreign Contribution Regulation Act-registered NGOs “whose compliance are regularly filed”.
While the jury is still out on the seamlessness of this new way of relief work, Regidi believes that cryptocurrency donations further strengthen the need for their regulation as opposed to a ban in India.
“Donations in fiat currencies from abroad, for instance, being cross-border transactions incur high costs and multiple intermediaries before they reach the beneficiary organization. These can be greatly reduced via cryptocurrencies.”
(Edited by Abinaya Vijayaraghavan and Amrita Das)
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