The effects of Covid-19 continue to reverberate through every corner of the globe, but to India in particular, the pandemic has dealt a severe blow to our economy and many of our major industries. In mid-May, our Prime Minister Narendra Modi addressed the nation, emphasising the nation’s need for ‘Atmanirbhar’—relying on oneself so that India may maintain its global competitiveness and emerge victoriously. While every business sector adapts to the new normal, one industry has been exemplary in its self-reliance and has experienced growth in the face of adversity—the cryptocurrency sector.
It’s been two months since the Indian Supreme Court overturned the banking ban issued by the Reserve Bank of India to all entities regulated by the RBI from dealing with or settling cryptocurrencies. Despite the global markets landslide, the Indian cryptocurrency sector has seen unprecedented growth in interest and trading volumes with major global players investing in the Indian crypto and blockchain industry.
The RBI needs to take advantage of the momentum the industry is currently witnessing, to build out a forward-looking legal framework that allows cryptocurrency companies to operate and contribute to the broader economy. In an effort to provide Indian policymakers with some guidance on creating fintech regulation that fosters responsible innovation and protects consumers, San Francisco-based cryptocurrency and software firm Ripple published a policy paper outlining their recommendations for legalising and regulating cryptocurrencies in India.
Despite the current economic crisis, the cryptocurrency markets have thrived, proving the asset class to be a much better hedge against market turmoil compared to traditional commodities such as gold or oil. Since the global market downturn, there has been increased interest and active participation from Indian retail investors in crypto. Industry players within India have recognised the surge and are actively looking to educate the masses and encourage adoption.
For example, CoinDCX has pledged $1.3 Mn to an initiative called #TryCrypto to encourage cryptocurrency mass adoption. Additionally, CoinDCX is also launching a blockchain and crypto educational platform as part of this initiative. Global cryptocurrency exchange, Binance, has also proposed similar initiatives and activities. To encourage the safe use of cryptocurrencies, clearer regulations will help protect retail investors in this nascent asset class that has been helping investors protect their wealth.
To date, cryptocurrencies and the crypto asset class are the most lucrative and attractive products to derive from the blockchain. To ban cryptocurrencies or neglect regulations around the crypto asset class will mean that India is missing a critical part of the industry; we risk losing innovation, tax revenue, and talent to overseas markets. As we continue our focus on ‘atmanirbhar’, it behoves the Indian economy to develop clear regulations in order to protect investors while supporting innovation and increase optimism from foreign investors.
It’s not just Indian investors who have been paying attention, but foreign investors have also had their eye on the Indian cryptocurrency industry. Since the RBI banking ban was lifted, there has been an influx of investors moving into the space, looking to enter the untapped Indian crypto market. In March, CoinDCX announced a successful $3 Mn Series A funding round led by some of the biggest investors in the cryptocurrency space. This was followed shortly by a $2.5 Mn strategic investment from Coinbase Ventures and Polychain Capital in May.
While the influx of foreign investment has been encouraging, we often hear from potential investors who are sceptical to enter the Indian market due to the lack of clear regulations. As we know, clear laws and regulations lead to increased investment. We need to look no further than countries such as Singapore, South Korea, and Japan to see how clear regulations have helped bolster the blockchain industries in these countries. India must take advantage of the current interest and momentum in crypto and blockchain, and push forward crypto laws and regulations to bolster the industry and economy in order to maintain its competitiveness on the world stage.
The Indian government has made great strides in supporting emerging technologies, including blockchain, and we have been reaping the rewards of these efforts. India’s technology-forward initiatives have led to the improvement of global reputation and competitiveness, job prospects and talent retention, and overall quality of life. While the government has been highly supportive of blockchain technology’s development—from financial infrastructure to trade—to great success, the Indian cryptocurrency markets have not earned the same global renown.
Amidst the global market turmoil, India’s cryptocurrency industry is at a pivotal point. More than ever, it is crucial to prioritise pushing forward smart and sensible crypto regulation in the cryptocurrency sector so that we do not disadvantage India’s technology potential. The government and policymakers now have the opportunity to safeguard India’s economy and nurture this extremely promising industry by creating transparent, principles-based regulatory frameworks that can support its growth, bringing its benefits to bear on the nation.