Evidently it seems like Indian government won't be banning crypto any time soon and let it stop from developing.
There is no denying that the Indian government has a controversial relationship with cryptocurrencies, as became clear recently when the government said it plans to ban all private cryptocurrencies – a list that could potentially cover almost all digital assets on the market today could have such restrictions in 2019.
To clarify, it is expected that the government will discuss again during the winter session the draft law on cryptocurrencies and the official regulation of digital currencies 2021, which, as the name suggests, is intended to create a legal framework in which all private cryptocurrencies are potentially banned.
However, there is still a lot of confusion about what the term private crypto is, and some speculate that it simply refers to security-focused tokens such as Monero (XMR) or ZCash (ZEC). On the other hand, Naimish Sanghvi, founder of crypto news site Coin Crunch India, believes the Indian government's definition of private assets can be extended to almost any crypto market:
“The 2019 Ministry of Economy report on cryptocurrencies basically states that anything that is not sovereign is defined as private cryptocurrency. And according to this logic, that means Bitcoin and Ethereum fall within that definition.
Lots of blurry lines
Nishal Sheti, CEO of Indian cryptocurrency exchange WazirX, said that it is difficult to understand what governments mean by private cryptocurrencies, especially since well-known assets like Bitcoin (BTC) and Ether (ETH) are essentially public on a structured transparent blockchain infrastructure. - each project contains its own specific application.
Shetty also stressed that people cannot use Indian rupees or tether (USDT) to pay fees on the bitcoin or ether blockchain. Instead, they need crypto to deploy decentralized applications (DApps) and create irreplaceable tokens (NFTs). He says:
“Although the description of the bill appears to be the same as in January 2021, several important events have occurred since January. First, the Standing Parliamentary Committee held a public consultation, and then the Prime Minister himself announced his call for crypto regulation in India. Sumit Gupta, CEO of cryptocurrency trading platform CoinDCX, said that nowhere else in the world has an official label for private cryptocurrencies – and the public is now awaiting the Indian government's definition of private wealth.
Is a total ban on the horizon?
When asked about a possible total ban on raising your ugly head again, Shetty said it's best to wait and find out more about the bill. He admits that he is optimistic about India's cryptocurrency prospects as a whole, citing recent comments from Finance Minister Nirmala Etaraman, in which he stated that India can only try to "regulate its digital asset sector" rather than all of them to permanently restrain the resulting innovation.
Pointing out the comprehensive guidelines proposed by the Financial Action Task Force (FATF) at this year's G20 summit, Shetti added:
“A total ban will also result in a surge in the OTC market, fake exchanges and brain drain from India. The crypto industry currently directly/indirectly employs 50,000 people and generates millions of tax revenues for the government. The crypto industry is open to regulation, but an outright ban would harm the country's financial and technology ecosystem. Likewise, Gupta is ready to welcome any bill as politicians start to see the importance of this new asset class as well as the growing appetite of retailers and institutional investors in India. "While we do not speculate on the full details of the bill, we are confident that the government will act to position our economy well for inclusive growth," he added.
According to him, ideally a balanced approach should be maintained between innovation and regulation, with the government clearly setting the specific parameters that are critical in crypto transactions without overshadowing the potential of the technology.
Regulation, not total ban
Recent reports from local Indian media say that a permanent ban is unlikely. Instead, the government could develop a well-designed governance framework on how digital assets can be managed in the region.
The media organization NDTV announced that it had managed to obtain a “record from the cabinet” with regards to the proposed cryptocurrency law. According to the document, there are only proposals to regulate cryptocurrencies as assets controlled by the Securities and Exchange Board of India (SEBI) rather than ban the market altogether. Additionally, the notice explains that investors are given a certain period of time to declare their cryptocurrencies and deposit them on a SEBI-regulated platform – a move where private portfolio operators involved can be taken by those operating in the region. completely prohibited.
Finally, the document shows that the forthcoming crypto laws will not allow digital assets to be recognized as legal tender. However, the government might consider creating its own central bank digital currency elsewhere. He also said it is best not to speculate on what could cause it, as full details of the bill are not yet available. What is certain, however, is that governments are recognizing the transformative potential of blockchain and are paying more attention to its diverse uses and applications in our daily lives. Gupta notes:
“A total ban is unlikely as it would challenge India's ability to use blockchain technology to transform our industry – an outcome we believe politicians prefer to avoid. Crypto is a strong trend shaping economies around the world, and we remain confident that our politicians will enact regulations that will allow our economy to take full advantage of the global crypto industry."
Policymaking and digital dominance in India
From the current perspective, India has a dynamic technology and innovation sector that is home to the third largest startup ecosystem in the world. With that in mind, Gupta noted that investor confidence in the country has recently continued to grow as Indian crypto firms raised investments to fund more than $500 million in 2021 alone.
In addition, FDI in this sector is expected to grow to more than $25 billion by 2025 and is expected to exceed $200 billion by 2030. In this regard, he added:
“Recently, Singapore cryptocurrency exchange Coinstore entered the Indian market despite regulatory uncertainty, meaning India's strength as a cryptocurrency hub continues to attract international companies. If a total ban goes into effect, it will not only affect the access and uptake of digital finance for consumers, it will also limit innovation and technological progress for the economy as a whole.
India has always been known as a technology hub and can enhance its economic and technological position as a global powerhouse by tackling the future of finance. Having said that, it will be interesting to see the country finally decide to move forward and regulate its rapidly growing digital asset market.