In an interview with The Hindu, India’s Finance Minister, Nirmala Sitharaman, has reiterated the need for regulations. The new crypto regulations will have a ‘window’ for fin-tech startups to experiment, she added.
As of now, there are no regulations governing cryptocurrency in India. However, the government is mulling on tabling a new crypto bill for ratification in the following monsoon session of the parliament.
Table of Contents
The growing crypto popularity in India
According to a report run by Chainalyis, India’s investments in crypto grew from nearly $200 million in 2019 to $40 billion in 2020.
Today, CoinSwitch Kuber, India’s most trusted trading exchange, accounts for nearly 50% of all the 15 million crypto investors in the country.
What has the government’s stance been so far?
Amid the rising popularity, the government has been taking a ‘calibrated’ approach towards digital currencies.
In 2020, the Supreme Court struck down a 2018 RBI circular banning all regulated entities from using cryptocurrencies. This opened up a new era of crypto boom in the country. Following the RBI ban, in 2019, the Finance Ministry Committee on Virtual Currencies recommended a draft bill to regulate cryptocurrencies. The draft called for an absolute ban on ‘private cryptocurrencies’ and has since been in cold storage.
Nonetheless, the current 2021 bill prepared after a gap of 2 years has been revamped and reworded to suit the present sentiment of investors and fintech startups.
The FM has time and again ruled out a complete ban.
The Proposed Bill
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 aims to regulate the crypto space while introducing an official digital currency. Explicit implications of the bill on crypto fintech space are still unknown.
Though no clear information is available on the provisions of the proposed law, Central Bank Digital Currency (CBDC) will be issued by RBI. CBDC will be a digital form of fiat currency based on blockchain technology.
What can be expected from the proposed bill?
Bitcoin has increased in value by over 6 times in the past 12 months. The high short-term returns have attracted a large chunk of millennials as first-time investors into any asset.
Understandably, the government is mulling over regulations that can make crypto investment safe and well-informed of the risks involved.
Regulations rather than an outright ban would be the central theme of the proposed bill.
An effective oversight mechanism by regulatory authorities will assure investor protection while addressing issues of financial irregularities including tax evasion, terror funding and money laundering.
P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.