While the Cabinet ruminates on the
cryptocurrency bill, 15 million Indians are now trading in digital coins. This almost puts us in the same league as the US where 23 million people trade in cryptos. At this point, the lack of legal clarity seems to be the only thing stopping a cryptocurrency revolution in India.
For the Indian investor, with cryptocurrency comes hesitancy, particularly in the face of hostility from the Reserve Bank and the Finance Ministry. However, investments in crypto have grown from around $200 million to nearly $40 billion in the past year, as per Chainalysis.
“We are hoping for positive regulations from the government that give clarity to investors and foster the crypto industry further,” said Sharan Nair, Chief Business Officer of crypto exchange platform CoinSwitch Kuber. “There are many people who have been hesitant to invest in cryptocurrencies due to the lack of legal clarity,” he added.
CoinSwitch Kuber has seen exponential growth since beginning operations in June 2020, and expects growth to speed up even more in the event of a favourable regulatory outcome.
“We’ve always voiced in favour of regulatory clarity around crypto assets and we’re looking forward to a regulatory framework that protects investor interest and helps businesses grow in this industry,” said Avinash Shekhar, Co-CEO of cryptocurrency exchange ZebPay.
Zebpay is one of the biggest crypto exchange platforms in the country with over 4 million users and over $1 billion in monthly transaction volumes.
The RBI’s view has been that cryptocurrencies are distinct from blockchain technology. “The Reserve Bank’s position has been that cryptocurrencies should be banned,” Finance Minister Nirmala Sitharaman recently told ET.
An inter-ministerial panel headed by former finance secretary Subhash Chandra Garg had earlier submitted a report seeking a ban on cryptocurrencies and authorising a digital currency of the RBI.
However, there has been more positive messaging from the Finance Minister: “We are not saying no to cryptocurrency. We are saying we’ll have to see how this technology can help fintech maximise the potential that it has,” Sitharaman said.
Crypto exchanges believe that a regulatory framework for crypto assets is the way forward instead of a blanket ban.
“We do not believe that a complete ban is likely as there have been some positive comments from the Finance Minister and talks of developing blockchain technology that is quickly gaining global prominence,” explains Nair.
Cryptocurrencies are also seeing wider acceptance among both retail and institutional investors. India should not be left behind in this revolution, he adds.
There are examples of other countries like Singapore that have effectively implemented laws and regulations around crypto assets, Shekhar points out. “We hope to see regulations that will help investors to experiment with this new asset class and take advantage of this global market.”
Sitharaman wants to work with the Reserve Bank to try and make the regulation a sophisticated one. “I can say the work is nearly complete. It is now for the cabinet to go into it,” the FM told ET.
RBI has indicated that it might soon unveil a central bank digital currency (CBDC), which is legal tender in digital form; essentially a digital rupee. Both Nair and Shekhar – despite differences with RBI on the future of crypto assets – believe this is a step in the right direction.
“e-RUPI, though not backed by blockchain, was a huge step towards acceptance of digital currencies. India’s own CBDC will make transactions and transfers easier”, Nair says.
Shekhar looks forward to seeing the design and role of a nationalized cryptocurrency in the Indian economy: “Especially, the features of the crypto — whether it’ll have a public ledger or not, the type of blockchain it’ll function, and so on.”
Let’s see how it’s handled, Sitharaman remarked.
“Is it possible with just a notification and a rule or is legislation definitely required? It’s a call which the cabinet will have to take,” she said.
