India’s Crypto Relief COVID Fund May Run into Hurdles, Say Experts

The fund has managed to raise $2.5 million from several noted global crypto stakeholders.

A cryptocurrency was started by India's blockchain industry professionals that aims to help the country fight against the second wave of COVID pandemic.

(Photo: IANS)

A cryptocurrency fund started by India's blockchain industry professionals, with the aim of helping the country combat the raging second wave of COVID-19, claims to have collected as much as Rs 22 crore in cryptocurrencies within three days of its launch.

This includes one bitcoin worth Rs 40 lakh from Australian Cricketer Brett lee.

Lee in a tweet said, “India has always been like a second home for me…I’d like to donate 1 BTC (Bitcoin) to Crypto Relief to help with the purchase of oxygen supplies for the hospitals across India."

However, experts say that the funds coming from outside India might run into regulatory hurdles as the Indian government doesn’t recognise cryptocurrencies as legal tender.

How Did The Crypto Relief Fund Start?

Taking notice of the current situation, crypto startup Polygon’s cofounder and COO Sandeep Nailwal tweeted Saturday, 24 April: “Can’t take this sitting down anymore, 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. I will take full responsibility for transparency, funds usage and regulatory compliance.”

Within the next 40 hours of the announcement, the fund raised $2.5 million from several noted global crypto stakeholders including former Coinbase CTO Balaji Srinivasan, Ethereum cofounder Vitalik Buterin and Coinbase product head Surojit Chatterjee.

Possible Regulatory Hurdles

The funds raised within India won't suffer any hurdles as it can be directly exchanged for fiat currency through crypto-exchanges.

However, there will be a problem in tracking what donations come from outside India.

According to India's Foreign Contribution Regulation Act (FCRA), only NGOs with adequate certification can pool money from abroad for social work in the country.

The Quint reached out to experts to understand what are the possible regulatory hurdles the crypto fund might face.

Kazim Rizvi, Founder of The Dialogue, said that at present under the Indian law, foreign funds collected for charitable purposes are subject to scrutiny and require a certain level of regulatory compliance. "Currently, in the absence of specific guidance from the Ministry of Finance, these foreign donations 'made through cryptocurrencies' may be treated at par with other regular foreign donations under FCRA and FEMA."

“As the cryptocurrency bill remains unintroduced, thereby not providing any clarity, thus, to err on the side of caution, the organisations that do receive aid from these cryptocurrencies relief funds should have FCRA approval,” he added.

In crypto-based donations, it is not possible to know where the deposits to it are coming from unless an appropriate KYC is put in place. There are exchanges in India that can convert these cryptos to INR and then use it to help the victims.

“Unless the volume of deposits received become very significant like few hundreds of crores INR, it is unlikely that the donation funds get into scrutiny and such as long as the funds reach the victims in authorised channels.”

Sathvik V, CEO, Unicoin told The Quint