Budget 2020: Banned since 2018, cryptocurrency market seeks clarity on regulations from FM Sitharaman

Updated: January 16, 2020 12:32:04 PM

Budget 2020-21: In 2018, the Reserve Bank of India arbitrarily banned banks from dealing with cryptocurrency businesses. It caused many startups to shut down or move out of India.

Budget 2020, Union Budget 2020 India, Budget 2020 India, Budget 2020-21Budget 2020 India: There might be some regulatory developments vis-a-vis the crypto market in the coming month. (Image: Bloomberg)
  • By Nischal Shetty

Union Budget 2020 India: There is a popular maxim that is now also known as the Peter Parker principle. It is “with great power, comes great responsibility”. The maxim holds true in any context that you apply it to, might it be leadership, day-to-day responsibilities, policymaking, governance (including both corporate and state governance), or anything else. So, with budget 2020 just around the corner, it makes even more sense considering the grand scheme of things at present.

Today, the world is witnessing a rising behemoth in the form of India. Our country is leaving no stone unturned in terms of innovation, technological adoption, and economic development. By leveraging technology, the urban-rural divide is being paved and a lion’s share is expected from India in ‘the next billion’ digital users. India and its market are gradually becoming more powerful. 

However, in the wake of the recent financial downturns (including IL&FS and Karvy crises, fading consumption, the slowdown in the automobile sector, etc.), there has come a pressing need to generate economic momentum. It is natural for everyone to look towards the fintech sector for the same, especially considering its sheer capabilities, technological proficiency, and the lean infrastructure it operates on.

India has ambitious plans today and is growing dynamically. Nearly all of its households have been electrified and 1.3 lakh gram panchayats covered under BharatNet initiative (all of which will receive free Wi-Fi by March). The need of the hour is to ensure that such digital initiatives also be backed with analogous support to the fintech segment. It will drive superior service adoption and make our digital economy more robust and, ultimately, contribute towards the $5-trillion target that the nation has set for itself. 

Here are some of the suggestions for and expectations from the Finance Ministry during this year’s budget session:

New reforms under Digital India 2.0: The Digital India initiative has been very successful by all accounts. Now, the government is going to launch the scheme in its novel avatar, Digital India 2.0. With a vision to make our digital economy worth $1 trillion, five strategic pillars have been identified by the government, that is, Digital Services, Digital Inclusion, Digital Economy, Digital Infrastructure, and Digital Confidence. Here, it needs to be noted that fintech platforms are already working on these fronts, and providing them with a conducive environment will make things easier for the government. For instance, the government can launch additional incentives for angel investments, since they support the startup segment and promote innovation.

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Government must outline solutions to support fintech startups: Last year, we saw the launch of regulatory sandbox frameworks by a number of regulatory bodies including RBI and SEBI. The move was appreciated by all corners of the fintech sector. The government must announce more measures like this to bring India shoulder-to-shoulder with its western counterparts. For instance, it can extend sops to the banking segment to catalyze open banking within the country. It can also identify next-gen startups, digital solutions, and markets such as crypto that will be transformational in the near future.

More clarity on cryptocurrency regulations by next month: In 2018, the Reserve Bank of India arbitrarily banned banks from dealing with cryptocurrency businesses. It caused many startups to shut down or move out of India. Although this move has been challenged in the Supreme Court, it’s 2020 and we haven’t seen much progress on this front. So, we might see some regulatory developments vis-a-vis the crypto market in the coming month. It will generate more clarity around the segment and increase India’s stakes within the globally emerging market.

A committee must be set up with industry stakeholders: Every market segment has its own challenges and its own set of requirements. They cannot be resolved just with an outside view of the situation. Same goes for the fintech segment and its subsectors. It is important for the government to take cognizance of this fact and set up a committee with industry stakeholders. This will enable both government and industry stakeholders to brainstorm with each other and solve a number of challenges that the segment has been facing of late.

Government must take a cue from international standards and bring in regulations: Lastly, the government can add a considerable thrust to its digital initiatives by taking cues from the global developments. Doing so will equip it with case studies and bring more effective regulations.

As already said, with great power, comes great responsibility. This year’s budget session has burdened the government’s shoulders with a great responsibility as much as it has given it the power to bear the same. The fintech sector is looking towards it with high hopes. Surely, it must do the needful.

(Nischal Shetty is the Founder and CEO at WazirX. Views expressed are the author’s own.)

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