Opinions vary, but indirect curbs are more likely than an outright ban
Recent comments from India’s Finance Minister Nirmala Sitharaman on cryptocurrency technology has thrown a wrench into the works. Although she did not outwardly make any announcement on the banning of cryptocurrency, she did stress the need to seek international collaboration for regulating the industry.
Her comments come in the wake of the Reserve Bank of India noting that “cryptocurrencies are not a currency” and that they could have a “destabilizing effect” on the monetary and fiscal stability of a country.
During the 2022 Union Budget, India’s Finance minister had also announced plans for launching the country’s own digital currency, while further adding that the “digital rupee” will boost the digital economy.
At this point, all the above signs point to a not-very-conducive future for cryptocurrency stakeholders.
An outright ban is “unlikely”
According to Suman Bannerjee, CIO, Hedonova:“As per The Coinage Act, 2011, the RBI is right. Currency can be produced by RBI only. The Finance Ministry has clarified that cryptocurrencies are an asset and not a currency. The debate is beyond this. The actual reason why the RBI wants to clamp down on crypto is its role in supporting money laundering. India is a non-capital convertible country. This means that there are a lot of regulations on Indian people or companies on their ability to convert the rupee for another currency. When a lot of Indians start selling rupees and buying another currency, the rupee weakens. In the Indian context, the usage of crypto as a legal tender needs to be controlled.”
Kumar Gaurav, founder and CEO, Cashaa is of the opinion that nothing is going to change anytime soon: “To impose a ban on cryptocurrencies, international collaboration is required to prevent any kind of regulatory arbitrage. Certainly banning is not an option, so the only way forward is to regulate it but nobody knows when the government will do it. Governments can temporarily influence the price of crypto but it is in nobody’s power to control it. Also, creating strict regulations could inevitably lead to an increase in cost.”
Another opinion came from an entrepreneur and startup advisor Kartik Garg: he does not see crypto as a replacement to legal tender or currencies but rather as a whole new asset class. “Though an outright ban on this asset class is highly unlikely, the government is going to try every means to curb its use in the form of taxations and stringent policies.”
Still, the government can shut down all the centralized exchanges that are operating in the country; but crypto users are tech-savvy; they can easily bypass these rules, Kumar Gaurav noted.
Nevertheless, the huge crash in crypto values a few months ago prices of crypto a few months back, coupled with the fall of several DeFi and crypto lending platforms has caused uncertainty in the country.