Future of Cryptocurrency in India and Lessons from the World

By Mehak Kulaar

In 2018, the Reserve Bank of India (RBI) stated concerns on trading and working with exchanges of virtual currency by any entity. This was struck down by the Supreme Court in 2020 and was viewed as a positive step towards cryptocurrency acceptance in India. This comes in light of the roaring prevalence of different cryptocurrency trades in India like WazirX, which has a  monthly exchange volume of nearly Rs 170 crore. CoinSwitch Kuber, another significant cryptocurrency platform, at present estimated to be at $500 million, owing to a series of funding from optimistic investors. Currently, Indians hold digital forms of money to the worth of Rs 10,000 crore. Thus, imposing a blanket ban on the asset class has been challenged by a majority part of industry experts. 

Additionally, most of the population is made up of the youth, Tech-savvy individuals who are keener on cryptocurrency adoption. Youngsters of 28 to 29-year-olds are the ones that are energetic about cryptocurrency trading in India. Additionally, as per BBC, one gigabyte of portable information costs $0.26 in India, which costs $12.37 in the U.S. 

This implies India has immense potential to become one of the largest crypto economies in the world. As per the EY Global Fintech Adoption Index 2019, India is one of the growing markets that is paving the way with around 87% of the population embracing fintech in some form.

Yet another ban?

As of March 2021, India is once more moving towards imposing a ban on cryptocurrencies like Bitcoin. As a proposition for banning the cryptocurrency and holding any and every individual discovered indulging in the similar will be held responsible according to the new rules.  According to Reuters, the stringent Bill will criminalise possession, mining, trading and transferring cryptocurrency assets. 

With several major tech giants like Goldman Sachs and Square Corporation moving towards investing in Bitcoin, it is clear that the strictness on India’s part is being perceived as a little far fetched. 

Alas, the world of cryptocurrencies is more than just bitcoin. It incorporates tokens supported against fiat, implied for cross-border payments by banks, and to raise funds like equity financing, and a developing trove of businesses around loaning and financial services in crypto. 

Market entities, dead against the blanket ban, say that this subtlety is missing in India’s position, and contend that in many nations controllers are moving toward laws according to the perspective of “safeguarding the customer”, as opposed to a blanket ban.

Ban to be Boon or Bane?

As India has done exceedingly well in mobile payments, the bureaucracy has developed a phlegmatic resistance to newer ideas. Bitcoin and other cryptocurrencies are misunderstood as instruments of money laundering that offer no real benefits. In place of that, the Indian Authorities wish to safeguard Indian customers & stabilize the economy by imposing a ban on cryptocurrency. While the intention behind the proposal seems acceptable, the move does not. As already mentioned above Indians hold cryptocurrencies to the value of Rs 10,000 crore, imposing a ban will lead to major losses to a majority of Indian investors. Another major point that is being raised by investors is that instead of a blanket ban, necessary regulations can help deliver the government’s motive (of safeguarding its citizens) without a total loss. If we are to lead by example, here’s how some major countries are monitoring & regulating cryptocurrencies. 

US- Like different laws, guidelines relating to cryptocurrencies fluctuate across states in the US, yet extensively, the standpoint and guidelines are cordial. New York Can be quoted as an example.

As early as 2016, and the first to do so, New York issued the “BitLicense” scheme, an exhaustive system to permit crypto-trades and related businesses. Entities occupied with the transmission, holding, purchasing and selling of cryptocurrencies as a client business, giving exchange services, and issuing cryptocurrency, working in New York, should get a permit from the New York State Department of Financial Services (NYDFS). The licensees are firmly regulated at standard with financial services firms. 

Wyoming is another broadly cited example for ideal guidelines. In 2018, the state considered some cryptocurrencies as “utility tokens” and absolved their “developers or vendors” from protection laws under the caveat that they meet certain conditions. 

European Union- For long, European nations practised their soft-touch regulatory systems on crypto-currencies freely. Presently, the European Union (EU) has tried to make a bloc-wide structure. In September 2020, the European Commission, the executive arm of the EU, put out a draft named, “Markets in Crypto-Assets Regulation” (MiCA). Like the General Data Protection Regulation (GDPR), MiCA is intended to set a worldwide example. 

Under MiCA, cryptocurrencies will be considered regulated financial instruments. Any firm occupied with care, financier, trading, or venture guidance identified with digital money will need an earlier endorsement from public administrative specialists under MiCA. 

A welcome feature is that the bill perceives various types of tokens (packages as crypto-assets, utility tokens, asset referred token, and E-money token) and proposes unique treatment. For example, if an entity skims another token, it should issue a white paper and send it ahead of time for notification to the individual national financial supervisory authority (for instance, BaFin in Germany). This has suggestions for Facebook’s Libra (presently Diem) proposition. 

MiCA, which will apply to all 27 members, may not come into play till next year (2022).

China- China, home to the world’s greatest Bitcoin mining platform, doesn’t acknowledge cryptocurrencies and doesn’t consider their utilization as methods for payments. Beijing has shown little resilience previously. Initial coin offerings (ICOs) were restricted in China in 2017. Trade platforms were likewise ordered to close after the crackdown on ICO. At that point, most trades moved to more amiable purviews like Japan, Hong Kong, or Korea. 

For China, the beef was particularly against ICOs and as far as cryptocurrencies are concerned, it is not unlawful to hold or exchange Bitcoin and other cryptos. Recently, China has consistently shown incredible enthusiasm towards the utilization of blockchain for modernizing China’s financial frameworks and turning into a world leader in this innovation. Lately, different guidelines and papers issued have supported blockchain, prompting prodded activity in blockchain start-ups. 

China currently wants to make a digital Yuan, as a feature of its push to be the pioneer in upcoming technologies including blockchain. The People’s Bank of China has been developing the sovereign digital currency for local exchanges on the web, just as cross border trades. It has effectively begun real-world trials for digital money in various cities.

Singapore- Bitcoin trades in Singapore are legitimate if authorized and regulated by the Monetary Authority of Singapore (the country’s national bank and financial regulator). 

This licensing specification was brought into law with the passing of the Payment Services Act in January 2020. 

Singapore is a well-known word for cryptocurrency trades be based on because of the low corporate tax rate (17% level rate) and the crypto-driven progressive climate. As of 2021, there are more than 230 blockchain native organizations set up in the country.