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Following the first crypto-related ban in 2018 that affected those in the industry, the 2021 plan to ban all private crypto assets has had a similar impact. With the anticipated “soon” decision and no clear timetable, traders and service providers remain unsure about the expected announcement.
This did not deter industry representatives from applying to regulators. Recently, Sumit Gupta, co-founder and CEO of CoinDCX, one of India’s biggest crypto-currency trading platforms, spoke on behalf of the crypto group in India. He asked the Indian government to control crypto assets “as a store of value and not as another currency” instead of banning them entirely. He wrote the following:
“As one of India’s key players in this industry, our request to the government would be to regulate crypto assets as a store of value and not as another currency. We would love to initiate dialogues with the concerned stakeholders in the government and help the country take ownership of its rightful place on the global crypto stage.”
India’s lawmakers first sounded a bitcoin alert and other private cryptocurrencies back in 2017. A year back, the central bank, Reserve Bank of India, barred banks from associating with crypto accounts. This has had a huge influence on small crypto companies and even supermarkets. However, in March last year, the Supreme Court of India ruled the change illegal only to see the crypto market boom afterwards, amid the furious Bitcoin 2020 rally.
The country now has around 342 companies in the crypto goods and services market. Any of these crypto-centric “startups” mushroomed following the Supreme Court’s decision to overrule the ban in 2020.
The current ban could choke an industry that, to say the least, is still in its infancy. As Arpit Agarwal, director of Blume Ventures, who invested in Bengaluru-based crypto exchange, warned Unocoin: if regulators approve the ban, the Indian crypto world “will be back to where we were in 2018.” He claimed that their best intentions were to teach legislators.
The ban prompted controversy among crypto participants in the US, such as Balaji Srinivasan, the former Coinbase CTO, who did not support India’s decision to ban crypto. He predicted that this ruling would reverse the nation’s economy and cost it billions of dollars. According to him, this ban will be close to “banning the financial internet” for 1,36 billion people to join the country. Srinivasan predicted that a ban on crypto could cause companies to leave the country, which would result in capital flight.
A recent comment from India’s Finance Minister, Nirmala Sitharaman, gave hope to the crypto sector. Stating that regulators were not “closing” their “minds” she further said:
We want to make sure that there is a window available for all kinds of experiments which will have to take place in the crypto world.”
There will be a very calibrated position taken on cryptocurrency.
#CNBCTV18IBLA | #FinanceMinister @nsitharaman says ‘Govt wants to ensure there’s a window for experiments in #Cryptocurrency space.’ Adds ‘There will be a very calibrated position taken on cryptocurrency.’ @ShereenBhan @FinMinIndia#Leadersofchange pic.twitter.com/YHEYA9INkf
— CNBC-TV18 (@CNBCTV18News) March 5, 2021
Interestingly, the new initiative to ban crypto runs parallel to RBI’s plans to introduce a digital roupee, a scheme similar to China’s e-yuan. According to the governor of the Central Bank, Shaktikanta Das, the CBDC is “receiving full attention.” Some bitcoin critics in the country, such as billionaire Rakesh Jhunjunwala, want regulators to concentrate on digital cryptography and ban cryptography.
Bitcoin and other private cryptos, such as Ethereum, have been at the forefront of rising media interest. This raised the overall crypto market cap by more than $1 trillion, mainly thanks to Bitcoin’s own market cap rising to a trillion dollars.
Since India is the eleventh largest nation in terms of crypto adoption, a heavy-handed ruling could lead to backdoor problems. Some speculated that the ban would have an effect on legitimate “government-compliant” enterprises and buyers who “declared their holdings,” whilst the majority of the industry would have an impact on “unregulated grey markets” operating on the government’s blindside.