India’s cryptocurrency investors were taken aback after the Parliament said it might potentially impose a ban on all private cryptocurrencies in a new bill.
According to the agenda deemed the Cryptocurrency and Regulation of Official Digital Currency Bill 2021, the Indian government plans to prohibit cryptocurrencies but allow “for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Additionally, it proposed to launch a framework for creating an official digital currency issued by the Reserve Bank of India (RBI). India is not alone in seeking to launch its own digital currency. Following other developed nations such as the USA, China, Venezuela and Estonia who considered launching CBDCs, India too proposed a similar idea.
If the bill is passed, it would prohibit using cryptocurrency as legal tender as well as currency, eliminating it from the payments system. With PM Narendra Modi, leader of the Bhartiya Janata Party currently possessing complete control of India’s two houses of Parliament, the legislation poses a strong possibility of evolving into a law.
The ruling government’s relationship with cryptocurrency has hardly been encouraging. The RBI temporarily banned crypto trading and transactions stating cyber fraud risks in 2018 before it was overturned by the Supreme Court in March 2020. India’s then-finance minister Arun Jaitley had said at the time:
“The government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system.”
While an official digital asset might open a slew of opportunities, will the ban cost India’s upcoming crypto ecosystem?
What the Indian crypto-verse thinks
This new move was met with much surprise and shock with entrepreneurs seeking more clarity. For instance, it’s important to note that it’s unclear which digital assets come under “private cryptocurrencies.”
Another question is, instead of completely banning private cryptocurrencies, would it better to develop a framework which would regulate them just like corporate stocks?
An established cryptocurrency exchange told Economic Times that “this is (the) time to be nervous.”
Entrepreneurs took to Twitter to express their dismay with this new potential law. In fact, #IndiaWantsCrypto was seen trending on Twitter with over 10K tweets from crypto enthusiasts from across the country.
Nischal Shetty, founder of cryptocurrency exchange Wazir X, tweeted that:
“There’s no such thing as a ‘private cryptocurrency’. Cryptos, by their very nature, are decentralized and public.”
“A country as large as India should at least work on understanding the underlying terminologies before presenting technology-related bills in Parliament – seems like a hurried move,” he added. “If Bill has complete ban then as an industry we’ll have to fight to get this reversed. Road to regulation is not easy!”
Shetty highlighted that imposing such as bill might have a slew of negative repercussions on the Indian economy.
“Wrong or hasty regulations will set us back by a decade. Right regulations will catapult India to the forefront of this technology,” he continued in the thread.
Echoing a similar sentiment, Sumit Gupta, co-founder and chief executive of CoinDCX, a cryptocurrency exchange in India said:
“Since the government is considering introducing the bill during this session of Parliament, we are sure the government will definitely listen to all the stakeholders before taking any decision.”
“We are talking to other stakeholders and will definitely initiate deeper dialogue with the government and showcase how we can actually create a healthy ecosystem in unison,” he said.
It should be noted that CoinDCX raised Rs 100 crores in a Series B funding round in December 2020 with aim to drive crypto adoption in India. Adding the three funding rounds it secured in 2020, CoinDCX’s total funding amount came close to $19.4m. The new law might mean pulling the brakes on its future plans.
Founder and co-chairman of Bridgewater Associates Ray Dalio cited prohibition of Bitcoin as a notable concern for investors warning them it’s highly unlikely that governments will let cryptocurrencies gain prominence over fiat money.
“Rather than it being far-fetched that the government would invade the privacy and/or prevent the use of Bitcoin (and its competitors), it seems to me that the more successful it is, the more likely these possibilities would be,” Dalio wrote in a note. “Bitcoin looks like a long-duration option on a highly unknown future.”
Stressing on how the new bill might prove to be detrimental to the crypto sector, Crypto Kanoon tweeted that the crypto ban would bring an end to:
“100+ running startups
10 Crypto Media Startups
50,000+ employed in the industry.
$100 Billion VC funding is at stake.
3 Potential Crypto Unicorn Startup ($100B)
1000+ potential startups in the seed phase.”
Alongside crypto experts and entrepreneurs, politicians too expressed their disagreement with the ban.
For instance, former Union Minister of State for Communications & Information Technology and Shipping Milind Deora believes that while launching a digital currency will boost India’s digital financial sector, the ban on private crypto might be a mistake.
“Not sure why we’re banning other cryptocurrencies though. Blockchain technology is the future. @RBI must embrace not fear it.”
In conclusion, alongside demotivating crypto entrepreneurs and investors in the country, the news of the likely ban might become a contributing factor in the fallback in the price of Bitcoin after it rose following Tesla boss Elon Musk’s Twitter bio.