As per new draft of FEMA regulations released by Reserve Bank of India, there will be no restrictions on FOREX (other than INR pair) | crypto | or any derivative trading overseas
RBI has probably realized that in the era of VPNs, and P2P crypto transactions it is not possible to ban things that are normal business activity in other countries
Reserve Bank of India - Press Releases (rbi.org.in)
@nithin Do you know anything about this?
This does not mention about withdrawing restrictions that are currently present under LRS. Can we assume that LRS guidelines will also be modified accordingly?
LRS comes under FEMA
Current regulation prohibits derivative / margin trading in overseas markets. RBI circular issued under FEMA that specifically banned margin/ derivative trading, will be over ridden by new regulations. Which means it is not a banned activity under LRS. So traders can transfer 100K USD per year to trade on crypto / forex.
MAster circular on LRS states
5. All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges/ overseas counterparty are not allowed under the Scheme
That means if derivative/margin trading is not expressly banned, it can be done.
Also RBI circular on overseas forex trading states
It is clarified that any person resident in India collecting and effecting / remitting such payments directly /indirectly outside India would make himself/ herself liable to be proceeded against with for contravention of the Foreign Exchange Management Act (FEMA), 1999 besides being liable for violation of regulations relating to Know Your Customer (KYC) norms / Anti Money Laundering (AML) standards.
So even now, its not a problem for traders . it is for those guys who collect funds
This is the statement that is not conclusive yet. Would be glad if it turns out to be true. Agree with everything else in your post.
There are separate master circulars for LRS and Overseas Direct investment under FEMA in RBI website.
Even in the existing circular for overseas direct investment, there is no restriction on margin/derivatives trading. As you noted, only LRS circular prevents margin/derivative trading.
This is what I m saying if FEMA regulations are “further liberalized” as per new draft regulations which does not prohibit forex/derivatives trading then all these circulars issued previously under FEMA does not apply
By the way government is not offering further liberty to all those suckers called general public out of kindness. They know they can not monitor and control these transactions in the era of VPNs and p2p. Therefore they are offering some liberty and then they will impose tax on those suckers.
IF i m not wrong, Futures and options were earlier classified as gambling. Then they legitimized it and then they imposed all kind of tax on trading.
I think you have missed my point which is
Currently there are many crypto / forex traders in this country (RBI circular itself mentions this) and the pie is growing every day. Govt can not go after these lakhs of traders/ brokers and prosecute them,
BUT govt is getting nothing out this, Primary aim of any govt is to tax anything that is easier to tax, (We are paying 200% tax on petrol because we cant buy it from elsewhere)
Therefore govt is trying to legitimize it, encourage it and TAX it. Govt doesnt care if banks/brokers/traders/exchange lose money or not
Also if these overseas transactions are allowed brokers like zerodha will simply set up a overseas forex/ crypto trading department.
You could probably ban public VPNs. Private VPNs will still be possible. There is always a way.
I hardly doubt India can do deep packet inspection for blocking VPNs.
Even then if you think india can do that, people will just route traffic through Tor network. Boohoo.
so in short this means that in coming near future, indian can now trade derivatives (options) in other markets like US market. while currently we can only hold the stocks
Look at the speed with which Indians are downloading VPNs
UAE has banned VPNs already but still almost half of the population is downloading and updating VPNs.
That clearly shows, in digital era, private companies are way ahead of govt censorship
When extremely liquid overseas markets are open for traders, they dont need to commit suicide for this