The general election fever is yet to slow down and as Prime Minister Narendra Modi is set to take oath for a historic second term, the murky status of cryptocurrency in the country might get clearer soon.
An interdisciplinary committee chaired by the Department of Economic Affairs (DEA) Secretary Subhash Chandra Garg submitted its report last month, which includes the draft for a crypto regulatory framework. Depending upon the cabinet’s approval and stance on cryptocurrency, the draft bill (reportedly called Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019) could be introduced in the parliament, this Budget Session.
Speaking to Inc42, a DEA senior official said that It’s been more than a month since the crypto committee submitted its report to the government. Now, it is up to the government to decide whether to put the draft in the public domain or not. Depending on the government’s will, the draft bill pertaining to cryptocurrencies can be expected to be introduced in June. However, the process might take three to six months further.
Is The Draft Bill Pro Or Against Crypto?
Refusing to directly comment about whether the report is for cryptocurrency or against it, the DEA official said that India needs a regulatory framework in either case, which at present is not there. The existing PMLA (Prevention of Money Laundering Act) and related Indian Penal Code sections have limited appeal to crypto-related businesses. The upcoming regulatory framework will directly address them.
As of now, the government has maintained its stance as stated in December 2017, which was reiterated by the finance minister during the 2018 Budget. However, we can expect more clarity on this very soon, said the official.
In its statement in 2017, the Indian government had likened cryptocurrency with Ponzi schemes and clarified its stance stating that Bitcoin or other cryptocurrency is neither real currency as they are not a legal tender nor assets as they are not backed by any physical attributes.
In line with the statement, finance minister Arun Jaitley, while presenting the Union Budget 2018 said that while the Indian government favours blockchain, it will do every bit to stop Bitcoin and cryptocurrency trading in India in financing illegitimate activities.
Jaitley stated, “The Indian government will take all measures to eliminate the use of crypto-assets in financing illegitimate activities. The government will also explore the use of blockchain technology for ushering in the digital economy.”
However, Shivam Thakral, cofounder and CEO of Delhi-based cryptocurrency exchange BuyUCoin, believes that India being a member of the G20 might follow suit with what the group decides pertaining to cryptocurrency trading.
“There is a low probability of banning crypto in India,” Thakral told Inc42.
In December last year, the G20 — the group of the world’s 20 biggest economies — had agreed to introduce regulations on crypto assets to counter money laundering and financial terrorism.
The decision was reached at the G20 leaders’ summit held in Argentina. The regulations are in line with the Financial Action Task Force (FATF) recommendations. In its joint press statement, the G20 said: “We will continue to monitor and, if necessary, tackle emerging risks and vulnerabilities in the financial system; and, through continued regulatory and supervisory cooperation, address fragmentation.”
The G20 countries which include India, China, US, UK and many EU countries agreed that international standards on crypto assets are crucial to support sustainable growth. The member countries said they will remain committed to the full, timely and consistent implementation and finalisation of the agreed financial reform agenda.
Election Results: Crypto Community Reacts On Modi 2.0
Speaking to Inc42, Sathvik Vishwanath, cofounder and CEO of Bengaluru-based Unocoin Technologies said, “From what I have seen in the last five years, crypto assets are not one of the technologies in India yet there has been a significant push on the digitization of payments. So, it is unlikely the stance would change for no reason and the best reason that could alter the stance is other countries adopting it and internally more and more people wanting it.”
Nischal Shetty, founder and CEO of Mumbai-based cryptocurrency exchange WazirX has been running a Twitter campaign against the RBI notification for the last 204 days. Shetty told Inc42,
“My expectation from the new government is simple and clear. Bring pro-crypto regulations.”
On April 6, the RBI had issued a notification banning all banks and RBI-regulated financial institutions from extending any services to crypto entities or crypto trading.
But startups are clear that the government needs to pave way for India to be a thriving market for crypto. This will help create numerous companies and thereby create lots of jobs. Modi 2.0 must look into crypto from the futuristic aspect, Shetty added.
Along with the Indian general election fever, crypto market too has significantly gone up, hitting $240 Bn in market size. While WazirX claims to have done a business of INR 3 Cr – INR 4 Cr in the last few days, BuyUCoin said it was bringing in INR 60-70 Lakh per day from its 1,500 daily active users.
Thakral added that the market is bullish despite the regulatory issues and that more people are joining crypto trading. “The volumes have increased. However, the RBI notification has badly affected us. And the government must address this at the earliest.”
Other Crypto Issues That The Draft Bill Must Address
Speaking of the issues at hand, Vishwanath stressed that for crypto assets to be regulated, there are challenges at KYC level and at the AML (anti-money laundering) level. Addressing these would be the first task. Then comes the intricacies of crypto due to the anonymised nature of many coins, usage restrictions and usability as payment instruments. These are other issues that need to be addressed.
Startups, Inc42 spoke to, expect a governmental body that is not only capable of monitoring but also regulating and adopting new standards in cryptocurrency.
“The challenges we face today may be different from the challenges we would face in 2-3 years from now as this is an evolving technology and is moving at a very high speed. So adaptability of the regulatory body and amendments to the regulations also becomes important else they regulation and its body may become less relevant by the time it actually becomes effective,” added Vishwanath.
Shetty seconded the idea of having a crypto committee. However, he added that the committee must be formed in participation with the industry stakeholders. Among other demands, startups told us that the sector must get free access to banking solutions, and a proposal and guideline system instead of regulations to understand the basic market requirements before setting rules in place.