A cryptocurrency bill under review in India has prompted speculation that the country could ban digital assets. But many industry insiders believe that once the details of the proposed law are finalised, it could bring about much-needed regulation rather than an outright ban on cryptocurrencies.
The sector “is optimistic about the outcome and feels that the government may regulate it, tax it and probably tighten the norms”, says Sumit Gupta, chief executive and co-founder of CoinDCX, a cryptocurrency exchange platform in India.
Concern about the future of cryptocurrencies in the country is emerging as Bitcoin this month hit a record high above $60,000. There are 8 million investors holding about $1.4 billion of cryptocurrency assets in India, according to industry estimates published by Reuters.
The possibility of a ban is a potential blow to exchanges and investors – many of whom bought heavily into cryptocurrencies last year after the Supreme Court reversed a 2018 order by the Reserve Bank of India (RBI) that had prevented banks from dealing with transactions related to the digital assets.
In February, central bank governor Shaktikanta Das told news channel CNBC-TV18 that he had “major concerns” about cryptocurrencies because of the impact they could have on “financial stability”. He said the central bank had relayed these concerns to the government, but added that the underlying blockchain technology was separate and could be useful. In the past, the RBI has said the possibility that digital currencies could be used for money laundering or terror financing is a major worry.
There have long been rumours about a potential ban, but these intensified last week after a Reuters report said a proposed new law could impose some of the world's strictest policies on cryptocurrencies. The news agency cited an unnamed government official who said India could make it illegal to even hold digital assets, as well as trade and mine them.
The Reuters report also suggested that investors would be given six months to liquidate their crypto holdings.
Investors are concerned, but they remain optimistic about the proposed law.
“Banning crypto will be like banning the internet or gold in [the] early days,” says Bitcoin investor Aditya Singh. “So, I personally feel the Indian government might take time but will eventually bring positive regulation.”
Comments from the country's finance minister Nirmala Sitharaman this month have given the industry some hope that the government might not introduce a blanket ban. She told local media that the government is open to “experiments” when it comes to cryptocurrencies.
“All of her statements and those from other officials tell me there will be more of a regulation and not a ban,” says Rahul Pagidipati, the chief executive at ZebPay, an Indian cryptocurrency exchange with 4 million customers.
But the company is also not ruling out the worst-case scenario.
“We are prepared, but not worried, about a ban,” says Mr Pagidipati.
Some details of the Cryptocurrency and Regulation of Official Digital Currency Bill emerged in January when it was listed in parliament, which proposed that all private cryptocurrencies in India are prohibited. The bill also includes details on creating a framework for the RBI to introduce its own digital currency.
“Since then, the industry has been talking with government officials and doing awareness campaigns like #IndiaWantsBitcoin,” says Mr Pagidipati.
News of the bill sparked a sell-off that lasted for a few days, he says. “After that short dip in early February, demand has shot up. February 2021 was our highest volume month of all time.”
Factors including Tesla chief executive Elon Musk backing Bitcoin have attracted more Indian investors to cryptocurrencies and exchanges have been growing their business, Mr Pagidipati says.
India is not alone in its concerns about the speculative nature of cryptocurrency investments. It has long been an issue globally, as countries grapple with how they can try to enforce some kind of oversight over the virtual currency ecosystem.