Delhi: Satoshi Nakamoto invented Bitcoin in 2009. With this, computer science went to the next level and we can say perhaps it created a trillion-dollar industry.
Yes, you read that right: trillion. In June 2010, the value of all cryptocurrency worldwide was $0. As of today, it's $1.1 trillion. Bitcoin alone is worth more than $600 billion. That's more valuable than any of the tech unicorns founded in the last decade, more valuable than Uber, Airbnb, Stripe, and Slack combined. Cryptocurrencies like Bitcoin and Dogecoin are making headlines around the Globe for their surging prices after a group of Reddit users started creating interest around them using social media.
When we talk of crypto projects in India, Inderjeet Singh, Cybersecurity Expert, Director General, Cyber Security Association of India is of the opinion that a proper strategy needs to be developed by the Indian government. The various aspects such as trading of cryptocurrencies, how to deal with it, who can possess it, and all other aspects need clarity.
A new bill is being introduced in the Lok Sabha that contemplates a ban/prohibition on cryptocurrencies in India. While the scope of the cryptocurrency regulation is unclear, it is going to adversely impact the nascent crypto community.
The cryptocurrency ecosystem in India has always been a grey area with no regulations whatsoever.
In India, although crypto exchanges are considered legal, cryptocurrencies are still not considered legal tender. As a result, the legal exchanges of the cryptocurrencies are not fully operational.
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Col. Inderjeet adds that transactions in banks are centralized whereas Crypto transactions are decentralized. Transactions performed on blockchains are encrypted with public-key cryptography.
The cryptography masks the real identities of the individuals behind the transactions, making crypto transactions pseudonymous. As a result, crime with bitcoin increases. Criminals use Bitcoin for money laundering and also for financing other criminal activities.
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The FBI has released a report stating that the agency is currently probing whether foreign governments, groups, or individuals funded Capitol rioters using Bitcoin. In September 2020, the French police arrested 29 people in a largescale operation to break a complex scheme financing Islamist extremists in Syria through the use of cryptocurrencies. Other countries have/are putting in place different measures including bans and new regulatory guidelines to curb the dirty money around cryptos.
Rather than banning, the Indian government is planning to regulate cryptocurrency. Indian government’s plan to table the “Cryptocurrency and Regulation of Official Digital Currency Bill 2021,” which would potentially prompt the development of a digital rupee while banning “private cryptocurrencies.” It would provide a framework for creating an official digital currency to be issued by the Reserve Bank of India (RBI).
As per Col. Inderjeet the industry has concerns even though the clarity on the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 still has to come.
According to the agenda, the bill seeks to “prohibit all private cryptocurrencies in India,” but allows “for certain exceptions to promote the underlying technology of cryptocurrency and its uses.” It also seeks to “create a facilitative framework for the creation of the official digital currency” that will be issued by the nation’s central bank, the Reserve Bank of India (RBI). India’s government has taken a Yes to blockchain technology and a No to cryptocurrencies. One of the reasons the Indian government moved to ban the use of cryptos in 2018 was because of their role in money laundering.
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The bill proposes the ban of “private” cryptocurrencies without defining “private.” Bitcoin and Ethereum are decentralized public blockchains. The ledgers are public, and anyone can validate and run a node, so until a clear indication of what “private” means, it is too early to interpret which cryptocurrencies’ ban has been proposed.
The RBI, via a circular issued on April 2018, had banned regulated entities from dealing in cryptocurrencies and providing services for facilitating any person or entity in dealing with or settling those. Suddenly this news was perceived that Bitcoin is illegal in India. Most exchanges had to shut instantly and some moved abroad. People became very skeptical of Bitcoin. The central bank’s banking ban was overruled by the Supreme Court in March 2020, bringing cheer to exchanges providing services to India-based clients.
Back in 2019, the ban on cryptocurrency bills was not introduced in Parliament. However, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the order of business said that certain exceptions to promote the underlying technology of cryptocurrency and its uses would be allowed.
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RBI’s Own Cryptocurrency? The Central Bank is showing keen interest to develop its regulated cryptocurrency- a digitized rupee. While it is still in the explorative stage, the government and Reserve Bank of India are working towards setting up a proper framework to create the official digital currency by the RBI – Central Bank Digital Currency (CBDC).
Col. Inderjeet explains that being mindful of the current trends and growth in the crypto sector, the Government has also proposed certain exceptions to promote the underlying technology of cryptocurrency and its uses. Industry experts are debating over the meaning of the word ‘private’ in the bill and are hopeful for a positive outcome for the Cryptocurrency industry in India.
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Many Indian traders believe that regulating Cryptocurrency in India would lead to a more economic crisis this is due to the recent news that the Indian government would pass a law that will prohibit the usage of private cryptocurrencies in India and a bill that would regulate Digital Currency this year. Besides this, the Reserve Bank of India (RBI) will create an official digital currency.
Last year there was a surge in crypto investors in India. The Indian cryptocurrency exchange CoinDCX and Coinswitch Kuber have also raised early-stage funding for their operations. This bill could end the cryptocurrency industry in India. The detailed information of the bill is yet not released into the public domain yet. However, a potential ban would significantly affect the ecosystem, there are over 7 million active crypto users in the country, over 340 startups offering crypto services, about 50,000 employees, over $1 Billion+ crypto assets owned by Indians, and millions of dollars in venture capital funding.
In December, a crypto scam came to light that was responsible for duping people of over $150 million. While such occurrences happen occasionally in the crypto space, crypto exchanges in India have come up with unique KYC guidelines to verify the identity of users and reduce the possibility of laundering money.
At first, cryptocurrencies are digital ledgers. Especially Bitcoin is not private. They are open source. Col. Inderjeet is suggesting certain steps that he thinks the government can take:-
In 2017, China banned Initial Coin Offerings (ICOs), a method to raise money with cryptocurrencies, and closed trading platforms. Bitcoin prices quickly fell about 8%. It's as yet unclear whether India's decision to ban Bitcoin and other cryptocurrencies would have a long-term effect.
Some countries actually need Bitcoin. Let's talk about countries that have always currency risk. For them, Bitcoin is the best hedge. Iran is moving towards it. Remember Venezuela having good oil reserves and infinite printing of money. Now people think that blockchain is good but Bitcoin is risky. Blockchain has been available for longer times. It was Bitcoin that added value to the blockchain ecosystem.
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What we see is that Indian cryptocurrency exchanges have started a joint initiative to convince parliament to regulate cryptocurrencies rather than impose an outright ban.
Under the #IndiaWantsBitcoin campaign, the exchanges have launched websites – indiawantscrypto.net and indiawantsbitcoin.org –asking for positive and progressive regulation of the crypto markets.
Col. Inderjeet very firmly says that it is high time that India should legitimize bitcoin by regulating it like a corporate stock and define cryptocurrency crimes to deter misuse of the technology. Since it is similar to other financial assets, Bitcoin should be traded like a stock. the government should allow the SEBI to regulate crypto exchanges in the country. If this happens, then crypto exchanges will be considered at par with other stock exchanges and will increase the confidence investors have in cryptos.
What Are the Next Steps? This bill has just been introduced, and it could take few months for passing the note (provided it gets passed). A committee will be formed, and they will have to provide recommendations and more clarity. These recommendations would go to the cabinet and must be passed in the lower and upper house. The bill will go a long way in deciding the future of cryptocurrency in India, which is stuck in limbo currently, being neither banned nor legal.
You can follow Col. Inderjeet on twitter @inderbarara, insta:inderbarara
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