If Indian Gov't Allows Crypto Trading, It Could Create Bull Run Within Country: Experts
04:17 GMT 18.11.2021 (Updated: 18:40 GMT 19.10.2022)
India's feelings about cryptocurrencies have been blowing hot and cold over the past few years. The country’s central bank, RBI, announced in 2018 that the banks will not be able to make deals in cryptocurrencies. However, the Supreme Court of India in March 2020 overturned the RBI circular banning this new form of money.
An Indian Parliamentary Standing Committee on Finance recently held a meeting with industry associations and experts on cryptocurrencies, during which a consensus was reached that although the digital currency cannot be stopped, it must be regulated.
Jayant Sinha, the Bharatiya Janata Party (BJP) parliamentarian and a former minister of state for finance, chaired the meeting.
The meeting was held just days after Prime Minister Narendra Modi presided over a high-level review of the future for cryptocurrency
This was the first meeting convened by the parliamentary panel on the subject, which has generated a lot of interest as well as concern in various quarters regarding investment potential and risks.
Sputnik asked industry experts to examine how the decision to regulate cryptocurrency could benefit millions of investors.
Is India Open for Cryptocurrency?
Talking to Sputnik about opening India up to cryptocurrencies, Hanif Shaikh, founder and chief executive of UpSocial Network, a blockchain-backed decentralised social discussion forum, said: “India was always open for cryptocurrencies but the only thing was that it is not legal tender.
"It won’t be legal tender even if crypto trade is allowed. However, it can be categorised as a digital-class asset.”
Saying that the parliamentary panel's agreement to regulating the cryptocurrency is a welcome move, Shaikh added that this was bound to happen purely from the perspective of the amount of investment that has gone into it in India.
He said: “If the government says that we are allowing the crypto trade, it could create a bull run within India.”
The Reserve Bank of India (RBI) has continuously raised concerns about cryptocurrencies, arguing that the digital currency poses a serious threat to the country's macroeconomics and financial stability.
A day after the parliamentary panel meeting, RBI Governor Shaktikanta Das again voiced his concerns over cryptocurrencies
saying that there are far deeper issues involved and intense discussion is needed.
However, according to reports in the media, despite the central bank's repeated concerns, the federal government is likely to introduce a Bill on cryptocurrencies during the winter session of the parliament beginning on 29 November.
Talking about the federal government's change in stance, Gautam Kathuria, a senior researcher at Delhi-based public policy think-tank, The Dialogue, told Sputnik that after initial reluctance, the government has moved towards an attitude of cautious optimism regarding regulation of this sector.
“While recognising potential issues such as consumer protection and price volatility, the general tone of the federal government has been fairly positive in recent times," he said.
"This shift in attitude has been reflected in comments by federal finance minister, Nirmala Sitharaman, who acknowledged the huge potential of this sector, as well as the global developments that have boosted adoption of cryptocurrency.”
“The guiding light has been the Supreme Court's verdict in the Internet and Mobile Association of India v the Reserve Bank of India case, which found an outright ban on cryptocurrencies to be unconstitutional,” Kathuria said.
Possible Ways to Regulate the Digital Currency
With lawmakers forming a consensus to regulate the digital currency, the industry experts also shared their insights on the possible regulatory mechanism.
Talking about probable regulation, Shaikh said: “The first and foremost thing that the government should do is to tax the crypto trade."
"Along with this, I feel there will be heavy regulations on crypto exchanges: the government can insist on the policy of Know Your Customer (KYC) with respect to those who are engaged in cryptocurrency trading along with the volume of trade to counter money-laundering.”
Reiterating that KYC should be necessary, he said the government might require crypto exchanges to share KYC information so people can't evade tax.
Sharing thoughts on possible ways to regulate cryptocurrencies, Bombay High Court advocate Satya Muley told Sputnik: “There is dire need for KYC protocols."
"Blockchain lacks common KYC identification which essentially means that people can open wallets without having to present valid identification. KYC protocols can prove an important provision to prevent frauds.”
“In addition, cryptocurrency can only be regulated if we can formulate policies for registering crypto exchanges in India and the same should be done for foreign crypto exchanges, who are keen on setting up businesses in India,” he added.
Frauds Still a Serious Concern
A man named Srikrishna Ramesh was arrested by Bengaluru city’s Central Crime Branch police in November 2020 for procuring drugs using bitcoin via the darknet and peddling it to his high-profile clients.
Further investigations revealed that Srikrishna was also a hacker who indulged in cybercrime such as ransomware attacks, hacking into bitcoin exchanges, looting cryptocurrency, money-laundering and cyber frauds, which netted multi-million rupees.
Apart from this, the recent Squid Game crypto scam
, where investors lost millions of dollars, also raises serious concerns about regulation.
“Since the cryptocurrency market is new in India, a lot of people are completely off-guard. Therefore, the only way to avoid fraud is to educate retail investors,” said Shaikh.
He said that this has been done for quite a long time by the crypto community but if they get support from the government and the regulators then it can be done better.
"The only way I can think of now is by educating the retail investors, which the crypto community is already doing. But if they get support from the government and the regulators, the job will be done in a much better way," Shaikh added.
Talking about effective ways to curb fraud, Muley said people must know that there is never any compulsion to pay in cryptocurrency as it is not entirely government regulated and is not yet widely accepted by businesses.
So, if someone insists on a crypto-based payment, it is definitely a red flag, he said.
He also cautioned people about refraining from making a digital copy of their personal crypto details either on laptop, mobile or on emails.
“Along with this, people should enable two-factor authentication wherever possible and use a different crypto password for every crypto platform,” he added.
Muley further said that in case someone falls prey to such scams it is also important to remember that although various aspects of cryptocurrency remain uncertain in India, certain existing laws such as the Indian Penal Code (IPC), IT Act and Prize Chits and Money Circulation Schemes (Banning) Act are equipped to deal with scams related to cryptocurrency.
However, the advocate said that with the probability of more regulations coming into the picture, investor protection will be increased.