By Sumit Gupta
In 2018, RBI had passed a de-facto ban by directing Indian banks to suspend their business dealings with Indian cryptocurrency exchanges. In March 2020, SC overturned the ban and allowed banks to resume business with crypto exchanges. In early 2021, ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ was scheduled to be tabled during the Budget Session. It indicated that the government was exploring a Central Bank Digital Currency.
Currently, we have around 75 lakh investors in India with crypto assets over Rs 10,000 crore. Most exchanges have self-regulatory practices. The average daily cryptocurrency trading volumes across the top Indian exchanges has grown by nearly 500% since March 2020. India has also become the second biggest Bitcoin nation in Asia, after China, and the sixth biggest in the world, after the US, Nigeria, China, Canada and the UK, according to global cryptocurrency exchange Paxful.
Currently, the crypto industry contributes significantly to wealth generation in the form of job creation, income tax on earnings, investments from offshore players, among others.
Recently FM Nirmala Sitharaman said the government was looking at a ‘calibrated approach towards cryptocurrencies’ and there would be ‘a window for crypto experiments’, which signalled a gradual change in mindset. The use of crypto assets in major developed markets is well accepted, where all of them are trying to develop regulations rather than impose a ban. In global markets, the value of a single Bitcoin has shot up to $57,000 with a market capitalisation of $1.1 trillion.
A recent report by the World Gold Council highlighted that crypto was the fifth-most popular investment tool in Russia, while Wall Street leaders are looking to invest in this digital currency. Electric-car maker Tesla recently bought $1.5 billion worth of bitcoins, accepting payments in cryptocurrency.
Instead of viewing such assets adversely, India can utilise a regulatory sandbox under Sebi and encourage industry-friendly policies. By providing the right regulatory framework, this huge pool of assets can be funnelled into the mainstream economy. They can act as a funnel for anti-money laundering and KYC norms, as well as serve as a major gateway to regulate cross-border transactions. With the inherent advantage of high security, transparency and instantaneous settlement of transactions, such a digital asset can prove to be a blessing for India.
Since every transaction through cryptocurrency and blockchain is fully verifiable, the payment system can be used to fight corruption.
Under the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, reports indicate that India probably aims to launch its own CBDC. This measure will be in line with many central banks.
In addition, India already has an established blockchain and crypto developer ecosystem that can be leveraged to build a really robust collaborative CBDC product.
By providing the right regulatory framework, India will also enable the country to fulfil its ambitions and goals of becoming a truly digital, Atmanirbhar, and $5-trillion economy.
The author is CEO and Co-founder, CoinDCX