Cryptocurrency advocates in India were buoyed by the Supreme Court decision back on March 4, when the apex court overturned a ban on Cryptocurrencies that the Reserve Bank of India (RBI) put in place in 2018. The decision generated much enthusiasm among Indian and foreign investors. However, the hope must be short-lived for India as the Central government is now planning to bring a law to ban Cryptocurrencies.
Crypto exchanges – The rise and fall
According to a recent report in The Economic Times, India’s Ministry of Finance is now inviting other ministries to discuss its earlier draft on banning crypto-assets, introduced a year ago. In July 2019, former finance secretary Subhash Garg proposed a complete ban on virtual currencies along with a $3.3 million fine and up to 10 years imprisonment on anyone involving in the dealing of digital currencies.
Currently in draft form, this law will ban and punish any direct or indirect use of cryptocurrency. After the consultations, the draft should be sent to the Parliament for final review.
After the RBI’s decision in April 2018, the virtual currency ecosystem in the country nearly choked, leading to several exchanges, including prominent ones like Koinex and Zebpay, shutting shop or shifting base.
However, there has been a sharp increase in trading volumes on cryptocurrency exchanges in India since March after the Supreme Court ruled in favor of crypto-related businesses.
Trading volume on Mumbai-based WazirX, one of India’s leading crypto exchanges, which was acquired by global exchange Binance in November last year, rose 400% and 270% month-on-month in March and April, respectively. WazirX’ founder and CEO Nischal Shetty, said the company is also seeing an uptick in new sign-ups and active users.
Bengaluru-based crypto exchange startup Tradehorn just announced that it will launch a new cryptocurrency exchange platform called ‘Tradehorn’ for Indian users in June 2020. The users were permitted to trade, deposit and withdraw in Indian rupees
Another major exchange, CoinDCX, recently raised funding from Polychain Capital and Cinbase for the expansion of its offerings. Sumit Gupta, CEO & Co-founder of CoinDCX said in a recent statement, “At a time when we are witnessing unprecedented growth in the use of Cryptocurrencies in India, there is a need to provide users with an extensive range of crypto-based financial services that can ensure the faster, simpler, and uninterrupted flow of capital.
However, the news of banning Cryptocurrencies sparked concerns among crypto companies, raising questions, such as: why can’t cryptocurrency be regulated instead of ‘banned’ in the country and secondly, why India could not do what other countries, like the U.S, do in regulating Cryptocurrencies.
Why India needs a crypto revival, not ban
As such, there are reasons for India to head for a crypto boom. Firstly, the rupee has been subject to persistent erosion in its dollar-denominated buying power. Declining confidence in the rupee and the government’s ability to manage it will be a major driver of interest in cryptocurrency in India, factors such as demonetization and now the COVID-19 pandemic situations are only factors putting further downward pressure on the currency, experts believe.
According to the EY Global Fintech Adoption Index 2019, India is one of the emerging markets that is leading the way with 87% of its population adopting fintech in some form.
With a significant number of unbanked population in the country, Blockchain has the potential to increase financial inclusion in the country by providing access to digital assets. Finally, from India’s booming Diaspora to internal migrant labor population – everyone can benefit in a crypto-based system.
Navin Gupta, Managing Director, South Asia & MENA at Ripple, a technology company that helps send money globally using blockchain, said, “We are confident that after careful deliberation and consultation with industry participants, Indian policymakers will consider the regulatory path and not a ban.”
With thoughtful inputs from both the private and public sectors, Indian policymakers can lead the way to provide clear regulatory guidance that can manage and mitigate these risks — ultimately helping Indian businesses, entrepreneurs, innovators, and consumers to benefit from blockchain technologies and digital assets in safe and meaningful ways.
As Gupta mentioned, “A thoughtful regulatory approach will also ensure India’s competitive edge is maintained in a similar fashion to other countries in Asia such as Singapore and Japan, who have taken forward-looking approaches to regulating digital assets, which in turn has triggered innovation and encouraged more enterprise use cases of digital assets.”