India's Reserve Bank has long condemned the use of cryptocurrencies
, but aside from the Supreme Court's rejection of its 2018 bill last year, the Indian government's opinion on crypto has been uncertain, to say the least.
On the one hand, sources tracking the government's position say they have moved away from the idea of a complete ban. On the other hand, more banks have begun to deny cryptocurrency-related companies access to their services, including ICICI Bank, Paytm Payments, Yes Bank and, most recently, IDFC First Bank.
The Reserve Bank of India's (RBI) position is understandable. After all, it is the body responsible for ensuring the country's ability to cope with financial shocks, and it has pointed out the risks of using cryptocurrencies many times in the past. Some banks are still citing the 2018 news as a reason for freezing accounts trading in cryptocurrencies, despite the RBI revoking them earlier this year.
According to reports, India's market regulator, the Securities and Exchange Board of India, will oversee legislation for the cryptocurrency sector once Bitcoin (BTC
) is classified as an asset class. Sources also suggest that an expert panel will be formed to study the technology and that parliament will discuss the introduction of a bill to regulate cryptocurrencies during the monsoon session.
Problems regarding taxation
India has previously taken drastic measures to reduce the amount of money that goes untaxed, including demonetizing 500- and 1000-rupee bills. One of the biggest concerns for the Indian government is the degree of anonymity that crypto offers and how it can be used to fund terrorism, launder money and sponsor other criminal affairs. Still, the question remains whether it is fair to make cryptocurrency investors pay the price for the negligence of digital law enforcement.
"Since the Supreme Court's ruling in March 2020, crypto-related trading in India has increased tremendously, especially among Millennial and Gen-Z investors," Sumit Gupta, CEO of India-based cryptocurrency exchanges CoinDCX, told The Guardian, adding, "Well-intentioned regulation will help strengthen the crypto-ecosystem in our country."
In March, Finance Minister Anurag Singh Thakur indicated that the government has collected income tax on cryptocurrency income and even tax on goods and services from cryptocurrency exchanges. However, he noted that the government cannot collect data on cryptocurrency income as it does not have the necessary resources to do so. Gupta added:
"We will continue to work with other actors in the crypto industry to bring our joint suggestions to the authorities."
Young and driven
The finance minister further indicated that India will not flatten all options for cryptocurrencies, with some reading between the lines that this could mean a possible ban on "private cryptocurrencies" to pave the way for a state-backed central bank digital currency (CBDC). However, this could be a huge miss for the younger generation who are leaning towards digital assets, just as the older generation used to gravitate towards gold.
But the RBI's inability to provide the Supreme Court with sufficient evidence that cryptocurrencies should be banned means that there is some pressure on the Indian authorities to allow cryptocurrencies in the country. Currently, however, Indian investors, especially younger ones, are getting sick of how unclear regulations are hampering their chances of profiting from the huge swings in the crypto market.
"India is one of the youngest countries with a large number of people who are early adopters of technology. Currently, we are seeing more and more people between the ages of 24 and 40 adopting crypto," Gupta said. However, when asked if India's plans for a CBDC have gained a foothold, he declined to comment. Sidharth Sogani, founder and CEO of cryptocurrency research firm Crebaco Global, did want to add the following:
"India needs a special department to regulate the crypto industry. No regulation will only encourage the black market."
Indian investors seem confident in the long-term growth of the industry, despite the recent market crash, and market experts and leaders seem optimistic about how the authorities will legislate crypto in the country. While progress is slow, a movement seems to be underway, but with a market of nearly 1 billion users, India's take on crypto is a huge concern for every cryptocurrency investor.