Bitcoin had dropped to $53,834 on Tuesday morning from the $61,000 mark in the wee hours of Sunday. The cryptocurrency was trading at $55,657 on Tuesday afternoon.
The last surge in bitcoin price to over $61,000 was on the back of the $1.9 trillion Covid relief package announced by the US government.
The uncertainty around the future of cryptocurrencies in India continues to haunt businesses in the red-hot market of virtual currencies. Even as Finance Minister Nirmala Sitharaman clarified at an event recently that the government will not completely shut cryptocurrencies in India, the country may go ahead with a sweeping ban on bitcoin and other several digital currencies. The government was expected to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the ongoing Parliament session to ban all ‘private’ cryptocurrencies amid concerns over their use for terror financing, money laundering, and other illegal activities. Startups and other businesses in cryptocurrencies, however, have been urging the government to avoid an outright ban that will hurt investments from millions of people in India.
Crypto exchanges had welcomed Nirmala Sitharaman’s statement at the recently held India Today Conclave that “while the RBI may take a call on official cryptocurrency but from our side, we are very clear that we are not shutting off all options.” However, a Reuters report on Monday, citing a senior government official, said that India will propose a law to ban cryptocurrencies and fine anyone trading in the country or even holding such digital assets. Startups have reiterated their key ask for regulating the market instead of coming with a law to ban it.
“KYC is practically the first step towards keeping track of transactions and proceed to the norms of AML/CFT (Combating financing of terrorism). It enables traceability of assets and hence prevents issuing for some illegal activities. We should take a cue from Japan and create a central body of cryptocurrency exchanges which would directly report to Securities and Exchange Board of India (SEBI) for following strict regulatory guidelines issued by RBI,” Shivam Thakral, CEO, BuyUcoin told Financial Express Online.
A report in February 2021 by the US-based blockchain analysis company Chainalysis, which provides data and analysis to government agencies, exchanges, and financial institutions to engage with cryptocurrencies, noted that a Kashmiri couple Jahanzaib Sami and Hina Bashir Beigh were arrested in March 2020 for soliciting cryptocurrency donations to a bitcoin address. They had received the address from a Syria-based ISIS operative to source weapons and explosives as they were allegedly planning attacks in India. In another instance, back in 2018, Pune Police had arrested a person named Amit Bhardwaj, touted as a bitcoin entrepreneur, for defrauding a whopping amount of Rs 2,000 crore of as many as 8,000 people, according to an Indian Express report. In the same year, according to a PTI report, Gujarat CID had arrested BitConnect promoter Divyesh Darji for allegedly duping investors of crores of rupees.
“Regulation is needed in this sector to help protect consumers. We’d like to see India regulate so that all companies have to implement KYC and AML processes to protect consumers. There is nothing about cryptocurrencies that make them more appealing to ‘bad actors’ than fiat currencies. In addition, it would be great to see India develop measures to promote innovation in the sector for example with incubators and start-up fund,” Dev Sharma, Country Lead for India at the US-based crypto trading platform Paxful.
Bitcoin had dropped to $53,834 on Tuesday morning from the $61,000 mark in the wee hours of Sunday. The cryptocurrency was trading at $55,657 at the time of filing this report as per the data from CoinMarketCap. The Reuters report, quoting John Wu, president of AVA Labs, said, “Renewed interest from the Indian government in banning cryptocurrencies led to the initial drop from the $60,000 range down to $56,000.” AVA Labs is an open-source platform for creating financial applications using blockchain technology-based in the US.
Arjun Vijay who is the co-founder and COO of Chennai-based crypto exchange Giottus said that government needs to come up with clear rules around customer verification, anti-money laundering policies, transaction monitoring, taxation rules, and limits on transaction size. “Cryptocurrency regulations is a moving target. With rapid evolution, the government cannot be expected to come with perfect regulations in the first attempt. Need a body like Sebi or GST committee to continuously adapt to the changing scenarios.”
The last surge in bitcoin price to over $61,000 was on the back of the $1.9 trillion Covid relief package announced by the US government. Bitcoin price had jumped last year as well when the US Congress passed the $484 billion Covid relief package in April. It coincided with the increase in bitcoin price from over $6,900 to nearly $9,000, showing the effect of the bill on investors’ appetite for risks involved in cryptocurrencies. Similarly, the $900 billion second stimulus announced in December witnessed an increase from over $23,000 to nearly $29,000 on December 31, 2020. According to industry estimates, there are over 7 million crypt investors in India with more than $1 billion in investments.