Cryptocurrency ownership and trading was only recently reinstated in India – the Indian Supreme Court, in March 2020, removed a ban by the Reserve Bank of India from 2018, on the trading of cryptocurrencies through banking channels in the country. This led to an explosion in the crypto space, as users began to explore the crypto sector, with many exchanges and digital wallets also seeing tremendous growth. However, this nascent but growing industry could soon be completely stamped out, if a recent bill introduced by the Indian government in Parliament is passed and made a law.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is set to be introduced in the ongoing budget session of Parliament by the government. This bill aims to clear the field for the Reserve Bank of India to potentially launch the digital version of the Indian currency, the rupee, with the RBI recently releasing a booklet where it stated that it was investigating if a digital fiat currency was viable and feasible. This is something that various central banks globally are trying to achieve, with central bank digital currencies (CBDCs) being seen as a way to take advantage of the growing popularity of digital currencies. However, while this move is being supported by the crypto industry in India, there are concerns that the bill would effectively ban all other cryptocurrencies, such as Bitcoin and Ethereum. This is not the first time that the Indian government has attempted to ban cryptocurrencies. In mid-2019, a government panel recommended a ban on digital currencies, with heavy fines and jail terms of up to 10 years for offenders.
This will deal a huge blow to the crypto sector in India, which has been seeing a lot of growth, riding on the back of the global crypto wave. This has also been followed by various other sectors looking to adopt cryptocurrencies to make themselves more attractive, with the online gambling industry being at the forefront of this. There are various examples of sites which have opened over the last year or so, and Indian casino site Winz.io is one of the first to offer online gambling with the option to place bets with Bitcoin, Litecoin Ethereum and other cryptos. Such operators have become very popular as a result, and are just one example of how different sectors are using cryptocurrencies to improve their offerings for customers.
The legal status of cryptocurrencies is also murky in India at the moment, and this bill will look to resolve that. There is no regulation of the crypto sector at the moment, and that is what the industry is calling for, rather than a blanket ban on all crypto trading. The news of this bill being introduced has led to a lot of panic in the Indian crypto market, with the price of Bitcoin having fallen by nearly 10% on Indian exchanges as a result.
According to some estimates, there are over 7 million Indians who have some form of crypto ownership, with over $1 billion in wealth invested in cryptocurrencies, and therefore it would not make much sense for the government to wipe out this value in a single move. Therefore, industry experts believe that the government will look to engage with them in discussions with regard to effective regulation, as this would be the best way for the sector to grow while remaining a legal pursuit. This is a viewpoint supported by some in the opposition as well, with Milind Deora, a prominent politician, tweeting that he believes that crypto and blockchain are the future, and so the RBI needs to embrace them and not ban them.