There is no denying that the government of India shares a contentious relationship with cryptocurrencies, as was recently made clear when the government indicated that it plans to ban all private cryptocurrencies – a list that could potentially include almost all digital assets in today’s market. having previously lifted all those restrictions in 2019.
To elaborate, it is expected that when the government meets again for its Winter Session, it will discuss the Bill of Cryptocurrencies and Regulation of the Official Digital Currency 2021, which as its name suggests, seeks to create a legislative framework in which all private cryptocurrencies can potentially be banned.
With that said, there is still a lot of confusion regarding what constitutes the term private crypto, with some people speculating that it may simply refer to security-focused tokens like Monero (XMR) or ZCash (ZEC). On the other hand, Naimish Sanghvi, founder of crypto news website Coin Crunch India, believes that the Indian government’s definition of a private asset could be expanded to include virtually all cryptocurrencies on the market, stating:
“In the 2019 Department of Economic Affairs report on cryptocurrencies, they essentially said that anything that is not sovereign is designated as a private cryptocurrency. And by that logic, it means that Bitcoin and Ethereum will fall under that definition.”
Blurry lines galore
Nischal Shetty, CEO of Indian crypto exchange WazirX, told Cointelegraph that it is difficult to understand what the government means by private cryptocurrencies, especially since prominent assets such as Bitcoin (BTC) and Ether (ETH) are essentially public cryptocurrencies that have been built. on transparent blockchain infrastructures – with each project presenting its own set of specific use cases.
Shetty further noted that people cannot use the Indian rupee or Tether (USDT) to pay fees on the Bitcoin or Ether blockchains. Instead, they need crypto to use decentralized applications (DApps) and create non-fungible tokens (NFTs). Said:
“Although the bill’s description appears to be the same as in January 2021, several noteworthy events have occurred since January. First, the Standing Parliamentary Committee invited a public consultation, and then our own Prime Minister came forward. to call for cryptocurrency regulations in India. “
Sumit Gupta, CEO of cryptocurrency trading platform CoinDCX, told Cointelegraph that there is no official label for a private cryptocurrency anywhere else in the world, so now, the public is eagerly awaiting the Indian government’s definition of a private asset.
In addition, he noted that since all the details of the bill are not yet available, it is best not to speculate on what it might entail. However, one thing that is clear is that the government recognizes the transformative potential of blockchain, and is paying more attention to its various uses and applications in our everyday lives. Gupta noted:
“A complete ban is unlikely as it will challenge India’s ability to leverage blockchain technology to transform our industries, Cryptocurrencies are a powerful trend that is shaping economies around the world, and we remain confident that our Policy makers will formulate regulations that will allow our economy to reap all the benefits that the global cryptocurrency industry has to offer. “
A blanket ban on the horizon?
When asked about the possibility of a total ban rearing its ugly head again, Shetty noted that it’s best to wait and find out more about the bill. He admitted that he is optimistic about India’s overall outlook towards cryptocurrencies, citing recent comments by Finance Minister Nirmala Setharaman, noting that India could only try to “regulate its digital asset sector” instead. of irretrievably stifling all the innovation that emanates from it.
Shetty alluded to the comprehensive Financial Action Task Force (FATF) guidelines that were proposed at this year’s G20 summit, which stated that cryptocurrencies are not a threat to any country’s local economy, adding:
“A blanket ban will also lead to an increase in OTC markets, fake exchanges and brain drain from India. The cryptocurrency industry today directly / indirectly employs 50,000 people and generates millions in tax revenue for the government. The cryptocurrency industry is open to regulation, but a blanket ban is something that will harm the entire financial and technological ecosystem of the country. “
Similarly, Gupta is keen to welcome any bill, as he ensures that policymakers are beginning to recognize the importance of this new asset class, as well as the growing appetite of retail and institutional investors in the India. “Although we are not going to speculate on all the details of the bill, we are confident that the government will act in the way that best positions our economy for inclusive growth,” he added.
In his opinion, the ideal would be to maintain a balanced approach between innovation and regulation, in which the government clearly establishes the specific parameters that are critical for cryptocurrency transactions without unduly stifling the potential of the technology.
Regulation instead of total prohibition
Recent reports from local Indian media outlets claim that a total ban might not be in the offing. Rather, the government could design a well-crafted governance framework on how to manage digital assets in the region.
News outlet NDTV has revealed that it has been able to get a “cabinet note” related to the cryptocurrency bill. According to the document, there are only suggestions to regulate cryptocurrencies as assets that are supervised by the Securities and Exchange Board of India (SEBI) rather than banning the market altogether. In addition, the note specifies that investors will have a set time to declare their cryptocurrency holdings and store them on SEBI-regulated platforms, suggesting that private wallet operators may be prohibited from operating in the region.
Lastly, the document suggests that upcoming crypto laws will not allow any digital asset to be recognized as legal tender. However, the government could consider creating its own central bank digital currency at some point.
Policymaking and India’s digital domain
As it stands, India has a vibrant technology and innovation sector that is home to the third largest startup ecosystem in the world. In this regard, Gupta pointed out that investor confidence in the country has not stopped growing recently, and that Indian cryptocurrency companies have accumulated more than 500 million dollars in financing investments in the course of 2021 alone.
In addition, it is estimated that foreign direct investment in the sector will also grow to more than 25,000 million dollars in 2025 and is likely to exceed 200,000 million dollars in 2030. In this regard, he added:
“Recently Singapore cryptocurrency exchange Coinstore entered the Indian market despite looming regulatory uncertainty, signifying India’s strength as a crypto hub that continues to attract international businesses. If a blanket ban goes into effect, it will not only affect access and adoption related to digital finance for consumers, but will also limit innovation and technological advancements for the broader economy. “
India is historically known as a technology hub and by embracing the future of finance, you can enhance your economic and technological position as a world power. So it will be interesting to see how the country finally decides to go ahead and regulate its burgeoning digital asset market.