Indian crypto ecosystem to get some regulatory warmth?
Earliest people I know who got involved in trading go back to 2011. Over the years Bitcoin and other cryptocurrencies gained popularity in the Indian market. Last year in June, the Indian market accounted for 10% of the total global transactions. However, the Government of India did not welcome cryptocurrencies with same enthusiasm. Fearing the anonymity of cryptocurrencies, the Central Bank and Government of India have always cautioned people regarding various risks associated with cryptocurrencies.
The prolonged skepticism of the Reserve Bank of India (RBI) about the cryptocurrencies, unfortunately, led to a blanket ban on crypto transactions in the first week of April this year. As per the notification released by the RBI on April 6, 2018, all regulated financial entities were instructed to completely stop dealing with anyone providing services in virtual currencies within 3 months. Following which, the complete ban on transaction is now being observed w.e.f July 5, 2018. A case was later filed against this notification in court, however the Supreme Court refused to put a stay on this ban. I believe, the final hearing of this case is on July 20 which will ultimately carve the future of cryptocurrencies in India.
The notification came as a jolt to the blockchain/crypto community, affecting the cryptocurrency trade drastically. Currency prices crashed on Indian exchanges. Before the ban, the Bitcoin price on international exchange was $6,950 and that on Zebpay was Rs 500,000 at an almost 8% premium. After the news of the ban, the global price of Bitcoin was $6,701 which is Rs 435,565 ($1= Rs 65). It was selling at Rs 340,000 on Zebpay at a discount of 27%. The prices of other cryptocurrency had also fallen.
This compelled many startups to shift their base outside India. Some crypto companies that I know such as International Digital Asset Platform, an exchange started by India-based founders decided to set up their company in Estonia. Another crypto exchange, BuyUCoin, is in the process of shifting its base to Singapore by next month. Such events will lead to sinking of talent in blockchain technology and related job creation in India. It will also send a negative message globally about India’s take on the these emerging technologies. I personally feel India has the potential to lead by example in blockchain technology. Only if the RBI changes its stance.
In response to a Right to Information petition filed by Varun Sethi, a startup consultant, it was noted that RBI does not have an internal committee to take decisions on cryptocurrencies. This clearly suggests that the ban on cryptocurrency trade in India was a knee-jerk reaction by the RBI. If RBI, allows institutional investors to invest in cryptocurrencies, it will give India a chance to compete with the rest of the world and contribute significantly to the economic growth. According to me, this development can lead to an increase in price of Bitcoin by $300.
Further, it is important for Government of India and RBI to take more informed decisions regarding cryptocurrency trade in India. The government must move in the direction of regulating cryptocurrencies in India, than banning it. Success stories from countries such as Japan must be taken into account, where legitimisation of cryptocurrency by the government led to an organized boom in the cryptocurrency trade and hence Japanese economy.
Decentralization will take over the current process of centralization, distributed ledger technology (DLT) will be implemented in our daily systems and cryptocurrencies will remain. Sooner or later the countries will start accepting the new order where there is more power to the people than to a centralized authority. If we as a country don’t change today, then in future we will not be able to take the benefit of this technology boom. The future is of DLT, crypto and ICO. It will dominate and countries will accept this new order but there will be regulations to avoid illicit practices. To facilitate institutional and retail investors we are working on a product which can help them to track their investments while separating the genuine ICOs from the scammy ones at the same time. If I have made you curious enough, please sign up and be the the first one to test the product.
