Despite legal ambiguity on whether cryptocurrency investments are allowed in India and the huge fluctuations in prices, there are around 15 million crypto traders and owners in the country and with these numbers, India has become the country with the largest number of crypto owners in the world.
The above figure is revealed by Broker Discovery and Broker Chooser platforms, and it shows that in a very short span of time, cryptocurrencies have managed to gain a foothold in our country. Cryptocurrencies have seen a sharp rise in interest since the ban was lifted in March 2020 by RBI, with Indian exchanges seeing impressive user additions and a steady increase in daily trading volumes.
There is still legal ambiguity regarding the investment and taxation of cryptocurrency, but according to sources, the government will soon clear the picture with a cryptocurrency bill. Some well-known online journals reported last month that the central government of India is working on introducing a cryptocurrency bill. This will provide a definition of cryptocurrencies, and it will also propose categorizing virtual currencies based on their use cases and technologies.
The bill is still awaiting cabinet approval and is expected to be introduced in parliament soon. However, That’s all we know about it, and there is no other detail available about the content of the bill. This is baffling to existing players like investors, coin Issuers, exchange companies, dealers, enthusiasts, platforms, and even app developers.
A bill is a proposal for legislation under consideration by a legislature. And it will still take time to be passed by both houses and get the assent of the President as per Article 111. It will be called an act of the legislature, or a statute only after getting the assent of the President. In addition, there may be follow-up approvals in many other areas such as state laws and various policy frameworks.
As of now, cryptocurrencies have no legal status in India and are unregulated. The major benefit of a cryptocurrency bill would be to define the future of virtual coin trade in the country. If there would be a bill, the government would have to define what could qualify as valid crypto in that bill. The definition itself would be a great start, as it will set a benchmark for the inclusion or even exclusion of a crypto asset.
The bill will not only clear all the confusion about the vision of the government on cryptocurrency but can also clear the picture about how these currencies will be treated and taxed.
There is no certainty yet about the government's stand on the bill. For now, we can just estimate and analyze the advantages and disadvantages of the bill. Whether the final result will be, all on cryptocurrency is a development in the right way and could encourage a lot of economic activity and innovation around crypto. The move by the government is likely to benefit Indian companies and investors who are investing in cryptocurrency and were waiting for a detailed law to manage virtual coin trading.
With this bill, now the government can finally be clear on the many questions surrounding the crypto-verse. The new draft bill may define cryptocurrencies as commodities or assets that were requested multiple times by cryptocurrency exchanges in India. The major advantage of all is that it could clear all the doubts about taxation for cryptocurrencies, including laws for payments, investments, and other utilities.
The said bill may also talk about the government's plan to issue an RBI-backed digital currency. Taking a step forward and introducing a digital currency with the help of blockchain technology will be a great step by the government. This can act as a blessing for the Indian crypto industry, companies, and investors.
If the RBI takes a more lenient stance and merely raises regulations and introduces crypto backed by a well-functioning central government, companies based in India may be asked to use it as a mode of exchange. and FPI can also be included with a lower rate of exchange.
Another advantage is possible if RBI starts depositing USD. If it does then the United States issues a cautionary note, but once all the holdings are stored in a CBDC, the RBI won't have to worry about how much asset it is accumulating in which currency. Thus, our foreign exchange reserves will then move up to the level we want and not where other countries want us to.
However, if we talk about the disadvantages then the bill could also express a ban on private cryptocurrencies, with some exemptions, to promote the underlying technology and to keep the RBI-backed digital currency ahead of them. However, If this happens then the government also has to define which cryptocurrencies will be considered private. And it will be a tough task for the governments to categorize cryptocurrencies, as a major part of this market is in private hands.
The Indian Government has a reputation for not involving parties that could be impacted by their decisions. We have seen the result of this behavior when PayPal without proper support is leaving the Indian market forever. Without supportive and encouraging decisions, a loss in terms of revenue and the job, it will create here in the future, is certain.
With a supportive Bill, India will certainly be playing a fascinating crypto game, But in presence of a not-so-robust government-backed crypto, Crypto startups in India will not get the recognition they should have otherwise. For example, MATIC is an impressive example of what our engineers are capable of. And it is also true that no one thinks RBI can even come closer to a working currency, it's been talked about for 3 years now.
Thus, an encouraging cryptocurrency bill will help companies, investors, and all the players to play and invest in this market without any heebie-jeebies but in case of a blanket ban or not very promising bill then its only cons.
Impact on Existing Players Like Investors, Coin Issuers, and Exchange Companies
The cryptocurrency bill will likely come up with a decision. However, it is interesting to see how this bill pours its impact on the citizens of India. Before any law passed there already a massive influence had taken its place in the market away when the government was not in support of it. And now when any bill is about to come from this cryptocurrency, various speculations have been made.
We could expect a cooperative and lenient stance by the government toward cryptocurrencies. The government is expected to evaluate all the possible aspects. All these events transpire to positive expectations from the cryptocurrency bill. Apparently when the world has accepted and used it globally then it is only expected from the government that they will not deny it. India has almost 15 million people trading in crypto However, this is not the time to panic. The government would assure that investor interest is protected at all costs as the final decision is about to come from the government side.
The cryptocurrency bill may have a huge footprint later after the final decision from the government. This cryptocurrency will be called a game-changer for all Investors, CoinIssuers, and Exchange Companies very soon. However, that totally relies on the government's decision on how much they will support this new trend.
The current pandemic has already left the government gazing into more sources of revenues and it is speculated that some of it is filled through the direct and indirect revenues generated via the regularization of cryptos. Accepting cryptocurrency will jump the nation into an additional powerhouse in digital assets.
A bill on Cryptocurrency will on one side give a clear answer to all the participants of the crypto-verse and on another side, if everything goes right then will give peace of mind to existing players like investors, coin Issuers, exchange companies, dealers, enthusiasts, platforms, and app developers.
A few things that they need to take care of are our taxation, benefits, and exemptions. They will have to know all of these in detail to avoid any penalties and deductions. Additionally, they will also have to reveal all their holding, profits, and losses in the forms GOI will soon introduce.
The crypto community of India has been excited since the drafting of the 'The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021' and as it appears, the bill will be presented in Parliament very soon.
The government's response in this matter now is a ray of hope for the crypto community, and the Ministry of Finance in February 2021 already made it clear that the government is looking at ways to prevent the use of cryptocurrencies in white-collar crimes. After which many experts believe that the government can create a regulatory framework instead of imposing a complete crypto ban, thus, relief is on its way.
Meanwhile, nothing can be predicted as of now, we can only assume things and analyze the estimated outcomes. Saying something about this matter without proper details will be purely speculative.
However, it is clear that the said Bill is yet to be introduced in Parliament, and considering the current situation, the decision can go in either direction. But in the meantime, we can try and raise our voice before the government, which hopefully may help us to get a helpful outcome.