The cryptocurrency market in India is currently booming, and retail investors are adding fuel to the fire with their excitement. India is reported to have millions of crypto investors, with the number growing by the day. Since there is no centralized governance of the cryptocurrency market, it is generally open for trading 24 hours a day, seven days a week.
According to media reports, India's three largest crypto exchanges - WazirX, Unocoin, and CoinDCX - say that the country's cryptocurrency holders range from 60 lakhs to one crore, with holdings worth over Rs 10,000 crore.
What is Cryptocurrency?
A cryptocurrency is a type of digital currency that is not controlled by a government, is decentralized, and is based on open-source software. Based on encryption technology, open-source software offers a forum for users to create their own private currency and make payments in it without having to deal with banks or central banks.
The RBI has repeatedly emphasized the potential for VCs to be used for terrorist funding, money laundering, and other illegal activities. Money laundering, terror funding, hacking, and fraud are all high risks caused by using cryptocurrency, according to the RBI. In contrast to previous RBI circulars and Inter-Ministerial Committee bills, the Hon'ble Supreme Court issued a landmark judgment in 2020 that examined and interpreted the issue, providing a pro-cryptocurrency perspective.
Will Government Allow Bitcoin, Cryptocurrency Trading in India?
According to three sources familiar with the discussions with Economic Times, the government may form a new panel of experts to look into the possibility of regulating cryptocurrency in India.
This comes amid the widespread belief that a committee led by former finance secretary Subhash Garg's proposals for a blanket ban on these assets in 2019 had become outdated.
The finance ministry is tracking the increasing amount of cryptocurrency trading in India, according to ET sources, and is speaking with stakeholders about possible supervisory risks.
Anurag Thakur, Minister of State for Finance and Corporate Affairs had previously met with representatives from the crypto and banking industries to discuss the issue.
Both Sitharaman and Thakur have stated publicly in recent months that the government would regulate cryptocurrency in a "calibrated" manner rather than outright ban it.
The new panel may look at how blockchain can be used to improve technology and recommend ways to control crypto assets separately from fiat currencies. On any proposed digital Rupee project, it may also collaborate closely with the Reserve Bank of India.
All banks were barred from allowing customers to trade in cryptocurrency by the RBI in 2018. Following a petition filed by Indian crypto entrepreneurs and the technology and internet industry group IAMAI, the Supreme Court lifted the ban in February 2020.
Cryptocurrency legal or illegal in India
The Finance Ministry's statement made no mention of the prohibition on purchasing, selling, or keeping cryptocurrencies. They mentioned that they are taking steps to prevent cryptocurrency from being used to finance illicit activities, which is a significant move toward a safe crypto ecosystem. People predicted that the bill would be anti-cryptocurrency even before it was introduced. However, Finance Minister Nirmala Sitharaman clarified the situation, saying:
"From our side, we are very clear that we are not shutting all options. We will allow certain windows for people to do experiments on the blockchain, bitcoins, or cryptocurrency."
It has been identified that there is a lack of clarification in India when it comes to cryptocurrency regulation. A system for cryptocurrency regulation must be well-structured and detailed, taking into account the interaction of law with its topics, such as crypto-exchanges, investors, and, most importantly, the people who work in the field.
Examining and adopting effective models from other nations, rather than imposing bans, maybe a more desirable approach that considers the needs of all customers. Several international jurisdictions, including Japan, Australia, and Russia, have enacted helpful legislation on the use of cryptocurrencies.