Over 15 million Indians have invested around $6.6B in cryptocurrencies as of May 2021. The growing popularity of cryptocurrencies in #India has led to a new Cryptocurrency & Regulatory draft bill.
To provide a legal framework for individuals and groups dealing in cryptocurrency, the Indian finance ministry has sent the new draft ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2019’ to the cabinet for clearance, a major move towards regulation.
The bill will be tabled in the parliament in the winter session, which is expected to be held in October 2021.
Crypto holdings in India
According to a recent report, over 15 million Indians have invested around $6.6 billion in cryptocurrencies as of May 2021.
This saw a whopping jump of over 600% from the $923 million recorded in April 2020.
At present, over 350 startups operate in the blockchain and cryptocurrency space.
According to CoinMarketCap, the current global cryptocurrency market is pegged at over $2 trillion.
Considering the huge interest from the investors and rapidly grown cryptocurrency market, the government is taking a cautious approach towards cryptocurrencies.
Regulation in India
Speaking on this scenario, Indian finance minister, Nirmala Sitharaman said that the cabinet note was ready on cryptocurrency bill and the ministry has been waiting for cabinet’s approval.
Before the draft was ready, an Inter-Ministerial Committee (IMC) submitted its report on cryptocurrency and recommended fines & imprisonments for crypto holders and traders.
But, it is still not clear whether the finance ministry has accepted these recommendations submitted by the panel.
The IMC also recommended in its report that all private cryptocurrencies, except any cryptocurrency issued by the State, should be prohibited in India.
The government’s position until now
On various platforms, however, the Finance minister made it clear that there will be no blanket ban on crypto projects.
Various reports suggest that Bitcoin and other cryptocurrencies may be allowed as an asset class in India and it can be treated as a tradeable asset class with a market, like commodities or art.
On the cryptocurrency bill, the largest India-based crypto company Polygon’s Co-Founder and COO Sandeep Nailwal believes that the government will not ban cryptocurrencies; rather it may introduce pragmatic regulations.
The key purpose of the cryptocurrency bill will be the creation of the official digital currency to be issued by the Reserve Bank of India (RBI).
It will also seek to prohibit all private cryptocurrencies in India, but it would permit certain exceptions to promote the underlying technology of cryptocurrency and its uses.
Reserve Bank advises banks not to support crypto
In April 2018’s circular, the Reserve Bank of India directed all the banks and financial institutions in the country to stop supporting individuals or companies dealing in digital currencies.
After the circular, many crypto exchanges operating in the country shut down their operations. The circular was later challenged in the Supreme Court by crypto exchanges.
In March 2020, the Supreme Court set aside the RBI’s 2018 circular and allowed banks and financial institutions from providing services related to cryptocurrencies.
To make their stand clear, RBI had announced in May 2021 that banks would be permitted to facilitate cryptocurrency trades after the Supreme Court ruling.
However, RBI still maintains that it has major concerns if cryptocurrency is termed as an asset class. It also issued an informal advisory recently to banks to stop handling crypto trades and investors recently.
RBI Governor Shaktikanta Das said that the concerns on the cryptocurrencies traded in the market have been conveyed to the government and there are no differences between the central bank and the finance ministry on cryptocurrency.
VCs eyeing crypto projects
Many leading Venture Capitalists (VCs) in India are scouting for innovative projects and startups in Decentralized Finance (DeFi) space. A lot of Indian crypto exchanges have raised funds and started sponsoring various sporting events.
Crypto and DeFi, powered by distributed ledger technology, are the future of finance. Today, more than $124 billion worth of assets locked in DeFi lending, borrowing and staking projects, as well as democratization of financial services has just begun.
A new era of open finance built on public blockchains will usher in transparency, efficiency and accessibility.
Expectations on reality
Whatever the government decides on cryptocurrency, more and more Indians are investing in crypto projects today.
As the exposure of Indians are very miniscule in the crypto market, the expectation is that the Indian government will not ban, but allow the industry to grow.
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