World of cryptocurrencies has changed, India must rethink about its bitcoin rules

By: |
December 05, 2020 5:45 AM

The US allowing a cryptocurrency index should prompt India to relook its cryptocurrency scepticism

The country has one of the highest number of blockchain-based start-ups.

S&P Dow Jones Indices will launch a cryptocurreny index in 2021, in association with virtual currency data solution company, Lukka. The US isn’t the first country to allow listing of cryptocurrencies as an asset class on exchanges, but the world’s largest economy welcoming cryptocurrencies as an asset class is certainly a priceless vote of confidence in cryptocurrencies. Unlike certain other jurisdictions, the US never banned cryptocurrencies.

But despite this softer approach, cryptocurrencies never found common acceptance. Experts expect things to change as cryptocurrencies draw more investment as an asset class at the bourses. When the move, as is expected, draws increased investments to cryptocurrencies, the government is likely to respond with appropriate regulation, which will bring certainty to the cryptocurrency ecosystem.

Increased investment will also spur more investment in blockchain technology which shall ultimately lead to innovations in fields like finance, land management, record keeping and even online voting. Countries that have promoted use of cryptocurrencies are also widely perceived as the ones leading the world in blockchain innovation. There have been degrees of liberal touch. China, for instance, allows people to invest in blockchain but only as an investment option and not as a digital currency. The country has one of the highest number of blockchain-based start-ups.

Against such a backdrop, India should perhaps relook its rather sceptical approach to cryptocurrencies. A starting point would be to learn from the regulatory approaches by countries that have adopted a progressive stance. It will help design a regulatory framework for allowing cryptocurrency operations, perhaps in a limited manner to begin with. While the Supreme Court had overturned the RBI order which had indirectly allowed cryptocurrencies exchanges to operate in the country, the government is yet to take a stand on whether it wishes to ban such cryptocurrency presence in India or not.

The world of cryptocurrencies has changed since the government first tried to introduce regulation. Some of the new cryptocurrencies are not as volatile as Bitcoin and have been pegged to some commodity like gasoline or gold. Even Bitcoins are not given to volatility as they were in initial years. India needs to treat cryptocurrencies with lesser scepticism.

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