Cryptocurrencies are form of digital money that enables anonymous, secure, and low-cost transactions. They are not controlled by any central authority. One can buy crypto, like bitcoin, by opening an account with the local crypto exchange.
Lured by a barrage of advertisements promising much high return and rising prices for bitcoins, the number of investors in bitcoin assets has surged in India.
While no official data is available, industry estimates suggest there are some 15 million to 20 million crypto investors in the country, with total crypto holdings of roughly 450 billion Indian rupees ($6 billion).
The government of India also, now plans to come down heavily on advertisements that seek to woo new investors, according to the draft summary of the bill as per media report.
Self-custodial wallets that allow people to store digital currencies outside exchanges are also likely to be banned, the source added.
The tough new regulations stem from the central bank’s grave concerns about digital currencies and aim to put in safeguards to ring-fence the traditional financial sector from cryptocurrencies, the draft summary of the bill said.
The Securities and Exchange Board of India (SEBI) will be the regulator for crypto assets, the draft summary also said.
As per one story published in social media, in 2016, when Hiten Malviya (29) bought a bitcoin for the first time, the virtual currency was worth less than $1,000. After an initial investment of Rs 40,000, Malviya had become a ‘crypto millionaire’ within a year as the value of bitcoin hit $20,000 in 2017-end.
In 2018, Malviya, however, lost nearly 80% of his net worth as bitcoin’s price crashed to $3,000. He could not even access his assets due to an RBI ban on facilitation of crypto trade by banks. “It was a difficult time not only financially but also socially. Crypto was perceived as illegal,” said Malviya.
Undoubtably, financial offerings always involve some amount of risk. Since crypto-assets fall in a grey area of regulations, fraudsters find it easy to con off people. The recent scams of Kerala and Bengaluru also testify that. Right now, there’s no specific regulatory authority too whose help a duped individual can take. Moreover, there’s no specific investigatory authority that takes charge of such cases. That’s why the crypto community is eager for regulation.
Bitcoin Under the lens for over three years:
April 6, 2018:
Prohibition on dealing in Virtual Currencies (VCs) Reserve Bank has repeatedly through its public notices on December 24, 2013, February 01, 2017 and December 05, 2017, cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. 2. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts,
On March04, 2020 Supreme Court quashes the RBI circular DBR.No.BP.BC.104/08.13.102/2017-18 dated April 06, 2018.
December 2021 RBI call for full ban.
January 2021: The government indicates it has plan to introduce bill banning ‘private’ crypto.
The government cryptic announcement, however, have spooked Indian investors and led to heavy selling. Nischal Shetty, CEO of crypto exchange, Wazirx, said, “The Indian market was trading at 15-20% discount to the global one briefly. The description of the bill being the same as in January had induced fear among investors,” he said.
However, Parliament’s month-long winter session is set to end on Thursday and there are no signs of the bill still. To add to investors’ worries, the RBI last week told its board that a complete crypto ban was needed as partial restrictions won’t work.
The domestic crypto industry, which includes unicorn sartups, has been in talk with the government and FM Nirmala Sitharaman’s statement in Parliament in November-end— that the government has no plans to recognise bitcoin as a ‘currency’—is in line with industry demands. “Crypto should be classified as an asset class. It is similarly regulated in many other countries, and most use cases of crypto are an investment and not payment,” said Ashish Singhal, co-chair of industry body BACC.
Crypto exchange BuyUcoin’s CEO Shivam Thakral also said that the “industry has been advocating against any recognition of crypto as a legal tender.” The government and RBI have a problem accepting privately issued currencies. The bill will be closely watched as the government’s definition of ‘private’ crypto is not clear.
Demand for ‘Asset’ Tag:
- The local crypto industry backs prohibiting crypto as currency as it woul interfere with monetory policy and fiscal control.
- It has called for the use of crypto only as an asset. The industry says regulation will protect investors, lead to better taxation and limit illegal use.
Why is Bitcoin so popular?
It’s been about a decade since Bitcoin expanded currency into the digital space of the internet. Since that time, it’s remained the most popular cryptocurrency in the world.
Some key factors that have contributed to Bitcoin’s popularity include:
- Although it fluctuates, its price is high. A single Bitcoin is worth 13,777.60 United States Dollar dollars as of this writing. This is significantly higher than other cryptocurrencies that exist.
- Major companies are starting to accept Bitcoins. These include Microsoft, and more.
- Bitcoin is easy to set up. Bitcoin is supported by the most notable exchanges and digital wallet platforms, such as Coinbase. This makes getting in the game easier.
- Investors have been supporting Bitcoin’s growth for years. Bitcoin has been around longer than all other cryptocurrencies. This has allowed them to gain a strong following of investors
Finance Minister Nirmala Sitharaman said earlier this week about Bitcoin not being recognised as a currency for payments in India. India is, however, working on its own central bank digital currency (CBDC) that will be governed and monitored by the Reserve Bank of India (RBI)
The Indian government isn’t looking to ban cryptocurrencies in the country, but it is looking to regulate them — as ‘assets. The country’s markets’ watchdog, the Securities and Exchange Board of India (SEBI), will be at the helm, according to a cabinet note seen by NDTV.
As per the note:
The Indian government is not looking to ban cryptocurrencies, but to regulate them as ‘assets.
All Indian crypto exchanges will reportedly come under the purview of the Securities and Exchange Board of India (SEBI).
Citizens will no longer be allowed to hold their crypto assets on foreign exchanges or in private wallets, according to the cabinet note as reported by social media.