Even as the largest and most famous cryptocurrency in the world is making headway, India is facing a major regulatory problem. The meteoric rise of Bitcoins can currently be attributed to continued interest from major corporations. Now, because of their potential gains, more and more small and large investors around the world are attracted to cryptocurrencies.
The price of Bitcoin has recently passed a record high of $54,000. After a leading electric carmaker announced that it bought $1.5 billion in bitcoin and would accept the currency as the mode of payment, the historic feat was achieved. Among analysts and investors around the world, the steep rise in the value of virtual currency has made it a hot subject.
India continues to be in a quagmire while investors are riding the waves of this worldwide phenomenon. There were rumors that the government was planning to ban all virtual private currencies and to launch its official digital currency. Such developments pose many relevant questions. Legal experts and investors, however, agree unanimously that prohibition is not the solution.
Push for Regulation
Many assume that a sweeping change such as imposing a ban would cost India a massive loss of investment. Many Indian crypto start-ups have collectively raised millions from international investors regardless of the standstill on regulations.
Experts agree that as the growth of the black market continues, the absence of enforcement will spell disaster. “It is very sad to see the lens through which Indian regulators look at a noble technology that can only bring transparency and align people to contribute positively on a scale. As I suggested to the Ministry of Finance, in order to enable innovators to develop, we need to create light-touch regulations, while at the same time preventing consumer interests.
Campaigns for education and understanding are going a long way now. Under current foreign exchange management policies, we will regard all cryptocurrencies as foreign currencies and monitor them. Enable it to happen up to a certain limit (250 K $ as FEMA remittance) before we can find out how to weed out the bad actors and encourage the good ones,’ says Akshay Aggarwal, Blockchained India’s managing trustee.
Aggarwal expresses the inexperienced management of talent as it has contributed to the loss of foreign innovators from India. “The regulatory process needs to change, we have to be transparent and learn from our past mistakes. Regulators need to give local innovators trust. Instead of banning the industry, invest money to better understand the industry, get new talent to propose ways to deal with problems, and introduce capacity-building initiatives before it gets too late.
Support them and lay a cozy route for those working in the crypto trenches with government funds, Aggarwal adds.
Future of Cryptocurrency
The future of cryptocurrencies seems to be in disarray in the absence of legislation and recognition by the Government of India. Recently, the Central Government announced that a new bill on cryptocurrencies will be launched. So far, there is no detail on the contents of the Official Digital Currency Bill 2021 Cryptocurrency and Regulation.
In 2018, the RBI prohibited banks from performing cryptocurrency-related transactions. The Supreme Court of India, however, lifted the ban in March 2020, and since then, cryptocurrencies have been operational in India.
Speculation is rife that current investors invested in private digital currencies such as Bitcoin may be impacted by the new cryptocurrency bill. If the Centre discusses and considers the recommendations made by the Inter-Ministerial Committee (IMC) on virtual currencies, this could be a possibility.
In its recommendations, the IMC had earlier claimed that private virtual coins lack currency attributes and can not replace fiat currencies.
With most advanced economies that prefer to control cryptocurrencies to capture their potential and handle risks, a ban would be out of sync. Countries such as Algeria, Bolivia, China, Venezuela, and Saudi Arabia, which have prohibited cryptocurrencies, do not share with India any constitutional values. With its progressive regulation, Singapore has attracted many Indian startups with cryptocurrency. India has about 350 startups in this space that will perish,” Anirudh Rastogi, founding and managing partner, Ikigai Law.
Cryptocurrencies, used in health, governance, IP management, and finance, are nothing but privately built blockchain applications. Just one of the many instances of use is their use as a currency. Experts agree that cryptocurrencies, basically because of the key feature that enables them to be transferred without a middleman from person to person, would not vanish from India.
As much as the internet did back in the 2000s, blockchain and digital assets are poised to change the planet. While the concerns of the Indian Government about capital flight, money laundering, and lack of consumer knowledge are understandable, the best way forward is possibly a light-touch and calculated approach to cultivating this global phenomenon.
In an isolated climate, regulators worldwide are adopting sandboxes as a way of enabling digital asset ventures to set up, run and improvise, whilst the government learns and establishes a tandem regulatory structure. An outright ban, although impractical to execute, would cost India a large pool of talent, direct/indirect tax revenues, FDI inflows, and the potential to be recognized as a global leader in fintech innovation,” says Anoush Bhasin, an Indian cryptocurrency space thought leader.
While the discussion on the future of cryptocurrencies continues, only time can say the course of the finale.