Cryptocurrency is Virtual, Risks are Real – The Indian Dilemma
Categories: Crypto News
Are Cryptocurrencies and Virtual Digital Assets (VDAs) illegal in India? While every investor would yearn to untangle the real essence in-between the fine lines, the short and sweet answer is ‘no’, VDAs, of which cryptocurrencies are a form – are not illegal in India as of March 2022. One can trade VDAs including cryptocurrencies online through cryptocurrency exchanges. It is noteworthy that the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is still, in a scary avatar, waiting to be tabled in Indian parliament (hopefully by May 2022). The bill proposes to prohibit all private cryptocurrencies in India however permitting for certain exceptions that promote blockchain technology. It also creates a framework for central bank digital currency (CBDC) that will be issued by the Reserve Bank of India. The silverlining in cloud however is the recent union budget of India, where Indian finance minister in her budget speech defined Virtual Digital Asset (VDAs) and proposed a 30% flat income tax on capital gains from VDAs (including cryptocurrency), to which many analysts have interpreted as a positive step towards the shift in the stance of Indian lawmakers. However, a few may exactly know what’s there is in the store.As per a report published by chainanalysis , India stands second globally at Crypto Adoption Index (2021) rankings . Domestically, In one of their interviews , co-chairs of the Blockchain and Crypto Assets Council (BACC) of the Internet and Mobile Association of India (IAMAI) mentioned approximately 15-20 million cryptocurrency users in India hold around USD 0.9 billion (INR Billion 6.6) worth crypto assets which makes India a potential market for cryptocurrencies and other VDAs . The Reserve Bank of India (RBI) has taken a hard stand on private cryptocurrencies; however, it is proponent of Central Bank Digital Currency (CBDC). In a recent speech, RBI Deputy Governor TR Sankar cited cryptocurrencies as a threat to the country’s financial and macroeconomic stability. He also warned investors about it.It also instructed to cease existing relationship with any such clients within three months from the date of the circular. This circular was challenged by IAMAI in Supreme court of India, finally on March 04, 2020, the court ordered to set aside RBI’s circular. The RBI on May 31 ,2021 through its circular asked banks not to cite its 2018 order as a reason to deny banking services to customers who deal in cryptocurrencies. The question which public-policy in India encounters is whether or not intent, time and level of maturity of end users is ripe in the country to allow cryptocurrencies. Once allowed openly they will run deep into veins and arteries of this country, considering that 65% of our country is young and almost every young woman and man is connected with a digital highway through her smartphone, consequences could be unintended. Policymakers and Multilateral institutions like IMF & the World Bank are still looking for evidence and learnings from countries like El Salvador where Bitcoin has been allowed as a legal tender last September. Cryptocurrency as a medium of exchange may still be a long way to go in Indian ecosystem. Crypto exchanges, specialists and lobby agencies must remember an old adage – Slow and Steady wins the race, they must not kill the golden goose in over exuberance and zeal of dynamic technology.