Despite the legal sentiment from the government, India’s crypto enthusiasts remain undeterred. However, the government is also sharing scepticism over how large crypto really is in the country.
Numbers Have Been Inflated
Early in November, Shaktikanta Das, the Governor of the Reserve Bank of India (RBI) expressed concerns over the excessive inflation of numbers related to crypto adoption in India. Speaking in an interview with Business Standard’s BFSI Insights Summit, the policymaker explained that numbers related to crypto adoption in India appear to be exaggerated, essentially casting a doubt on how big crypto truly is in the country.
Das pointed out that since cryptocurrencies are unregulated in India, it is impossible for the RBI to get an accurate estimate of people who use crypto in the country. However, even if the numbers being reported are true, he explained that about 70 percent of market participants have invested between INR 1,000 and INR 3,000 ($13 and $40) in crypto. So, their volumes aren’t particularly high.
Das was responding to reports that India currently has the highest levels of crypto adoption in the world. Back in October, the BrokerChoose annual crypto proliferation index reportedly shared that about 100 million Indians already use cryptocurrencies. That will be about 7.3 percent of the entire country’s population, putting India in fifth place behind Ukraine, Russia, Kenya, and the United States.
Regardless, Das doesn’t believe that crypto is that big. The policymaker has expressed concern over the number of people moving into an unregulated space, although it is becoming more obvious that the Indian government is looking into ways to regulate the industry going forward.
Crypto Regulations Incoming
Early in December, local news source NDTV reported that it had gotten the details of a cabinet note that was making rounds in the government concerning a proposed crypto bill. Sunil Prabhu, a reporter for the news outlet, explained that the note contained suggestions for the government to regulate digital assets as opposed to an outright ban.
Under the new regime, cryptocurrencies would be overseen by the Securities and Exchange Board of India (SEBI) – as opposed to the Reserve Bank. Prabhu also pointed out that investors will be given a specific time frame to publicize their crypto holdings with the government and transfer their assets to exchanges and brokers that are regulated by the SEBI. This way, the government will be able to enforce stronger reporting guidelines and prevent the use of cryptocurrencies in money laundering and other crimes.
Prabhu also explained that the government will be making some monetary policy changes while focusing on the crypto sector. Digital assets will still not be recognized as legal tender or currencies, with Prabhu explaining:
“Cryptocurrency as a legal tender will not be accepted. That is a clear no. I think that that is what even the prime minister in his deliberations at that meeting made absolutely clear to ensure that does not take place.”
India’s proposed crypto bill has been making the rounds for a while now. In November, Lok Sabha, the country’s lower house of parliament, shared the Cryptocurrency and Regulation of Official Digital Currency Bill – one of the 26 new pieces of legislation that it plans to address as its winter session. The document proposed a ban on all private cryptocurrencies in the country, with the sole exception of assets that “promote the underlying technology of cryptocurrency and its uses.”
Interestingly, the bill also promotes the creation of a central bank digital currency (CBDC) by the Indian government.
That bill has already appeared on the Indian parliamentary agenda since the start of the year. Despite this it has still not yielded any votes. It is one of the many solutions proposed to address the crypto regulatory issue, with the Indian government looking to put this problem to bed once and for all.
Once the bill came out, the market’s reaction was swift. It became obvious that the Indian government is looking to toe the same line as China, which has banned the use of all private cryptocurrencies as it works round the clock to launch its CBDC – the digital yuan. China’s news did little to move the markets, particularly since the Chinese government has been anti-crypto for years. But, to lose India as well could be devastating for the crypto economy.
Crypto Still Thrives in India
Regardless of the fears, crypto is still booming in India for now. Coinstore, a crypto exchange based in Singapore, recently announced the launch of a $20 million fund to establish three new offices in India – in Bangalore, New Delhi, and Mumbai. Besides that, the exchange is also launching its mobile and web platforms in India, offering spot and futures trading as well as a new crypto investment opportunity for Indians.
In August, at the height of uncertainty over crypto’s future in India, CoinDCX – one of the country’s largest exchanges – also raised $90 million in its Series C funding round. The successful capital raise meant that CoinDCX is now the first crypto firm in India to achieve unicorn status with a nominal valuation of $1.1 billion. If India does decide to regulate and not ban crypto, the progress made by these countries can continue in earnest.