Crypto in India is currently booming, the market has been thriving, and retail investors are adding to the fire with their enthusiasm. India has been estimated to have over 10M + crypto investors, and this number is snowballing every day.
While a significant number of Indians are wholeheartedly affirming cryptocurrencies, one piece of misinformation is holding back many more millions. People confuse the unregulated aspect of cryptocurrencies with being illegal.
Cryptocurrencies are not illegal; anybody can buy, sell and trade cryptocurrencies. It’s unregulated; we do not have a regulatory framework to govern its functioning for now. However, the Indian government is exploring crypto regulation. Meanwhile, crypto exchanges like CoinSwitch Kuber have been key in supporting the government and helping investors join the bandwagon by self-regulating and obliging a thorough KYC check for all their investors.
Was cryptocurrency ever banned?
When cryptocurrencies started to blow up in India in 2017, tech-savvy retail investors were relishing them. But there were also folks who were taking undue advantage of it and were fuelling illicit activities.
Since at the time, cryptocurrencies were in a very nascent stage, and the regulators were yet to decipher their adoption. To curb the rise in illicit activities, the government took measures that they thought were best at the time.
In 2018, The Finance Ministry released a statement saying:
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The Government does not consider Cryptocurrencies “as Legal Tender or Coin” and will take all measures to eliminate the use of these Crypto Assets in Financing “Illegitimate Activities” or a Part of the Payment System The Government will explore the use of Blockchain technology proactively for assuring in Digital Economy.”
The above statement from the Finance Minister was followed by a circular from RBI. It suggested all entities governed by them stop offering any kind of service to entities associated with virtual currencies.
Things to note here are:
The government was never against the technology; they intended to prevent the wrong usage of cryptocurrencies and blockchain.
In the statement released by the Finance Ministry, it nowhere said that buying, selling or holding cryptocurrencies were prohibited. They said that they are taking measures to eradicate the use of crypto in financing illegal activities: a great step towards a healthy crypto ecosystem.
Additionally, they said they don’t consider it as a part of the payment system. Meaning one can’t use crypto to buy and sell things; however, they never said it couldn’t be held as an asset.
Many people missed reading these details, resulting in a very chaotic state where people started to doubt cryptocurrencies.
Government’s take on cryptocurrencies
Fast forward to 2020, the advancements that the crypto regulated countries like the U.S, Singapore, etc. moved Indian authorities to rethink their decision.
Resulting in the Supreme Court of India retracting the RBI’s circular issued in 2018. Leading to banks like HDFC Bank, Yes Bank, ICICI Bank, and the State Bank of India resuming their transactions with cryptocurrency exchanges.
Soon after which, NASSCOM also tweeted:
We welcome the Supreme Court’s decision to lift #RBI‘s ban on trading in #Cryptocurrency.
We believe that banning #tech is not the solution, a risk based framework must be developed to regulate and monitor cryptocurrencies and tokens.@debjani_ghosh_ @AA_speaks @NasscomPolicy
— NASSCOM (@nasscom) March 4, 2020
A couple of months into this, India was already riding the crypto wave. We re-entered the market at a time when the equity markets were touching new lower levels every day, and cryptocurrencies were rallying one after the other.
It did not take long for cryptocurrencies to make a place for themselves in the investment landscape. Observing the boost in the adoption of cryptocurrencies, the government announced introducing a new bill concerning crypto.
Even before the bill was presented, people speculated that it was unfavourable towards cryptocurrencies. But Finance Minister, Nirmala Sitharaman, cleared the air and said:
“From our side, we are very clear that we are not shutting all options. We will allow certain windows for people to do experiments on the blockchain, bitcoins or cryptocurrency.”
She acknowledged that blockchain is a vast area, and growth of fintech depends on such experiments. She also said that India has an advantage in it.
“A lot of fintech companies have made a lot of progress on it. We have got several presentations. Much work at the state level is happening, and we want to take it in a big way in IFSC or Gift City in Gandhinagar,” she said.
The Finance Ministry is planning to spend more time on this and soon develop a set of guidelines for cryptocurrencies.
The bottom line
Countries that have regulated cryptocurrencies also went through similar phases. At first, they found it challenging to adopt cryptocurrencies, but to avoid failing to keep up with technological innovations, they embraced them.
India, too, acknowledges that we can’t afford to not move with these advances, especially with the exponential returns of over 800% from cryptocurrencies like Bitcoin. Significant Indians are already sailing through cryptocurrencies, and with platforms like CoinSwitch Kuber coming into play, we can expect a surge in crypto investors in the country.
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