There has been a lot of turbulence and uncertainty in the Indian crypto market since November 23rd when it first came to light that the government was considering a bill that would propose a ban on all ‘private’ cryptocurrencies and focus on the development of an official digital currency. The bill was to be presented in the winter session of the lower house of the Indian Parliament, which had been scheduled to begin this week. There had been numerous rumors surrounding the bill in question since then, particularly because no details had been officially revealed by the government.
This news had resulted in panic selling on WazirX, a local crypto exchange, on November 24th. The vague wording of the bill and the lack of clarification from the government left many people confused and uncertain about the prospect of cryptocurrencies in India. Some experts had suggested that the Indian government may outright impose a ban on cryptocurrencies, as it had hinted at and attempted to restrict activities previously. Others suggested that there were going to exceptions, such as bitcoin regulation would be introduced and a few others would also be exempted.
Now, it appears that the Indian government has provided a clear cut answer, as local media reported that an outright ban on cryptocurrencies will not be imposed. Instead, the sector is to be regulated in the country. According to an Indian news outlet, they had gotten their hands on the details provided in a cabinet note on Thursday, which was circulating in the government about the proposed crypto bill. The media said that the note comprised of suggestions for regulating the crypto assets in the market, with the responsibility of regulation of local exchanges to fall under the Securities and Exchange Board of India (SEBI).
The reports stated that investors would be given a particular time frame in which to declare their crypto assets and holdings. They would be required to transfer these to exchanges that will be regulated by the SEBI. This shows that there is a possibility that the government may decide to impose a ban on cryptocurrency wallets. If the government decides to do so, it could be because of their desire to mitigate the risk of terrorism financing and money laundering through the use of these crypto assets. Furthermore, the reports indicated that the government was planning to put its plans of developing a central bank digital currency (CBDC) on hold with the Reserve Bank of India (RBI) because it will be focusing on the crypto space for now.
It is also important to note that the Indian government will focus on crypto regulation and has absolutely no intention of recognizing any of the crypto assets as currencies, or adopting them as legal tender. This suggests that it will provide a clear distinction to eliminate any confusion. The reports indicated that cryptocurrency would not be accepted as a legal tender, but they will eventually develop a standalone virtual currency i.e. a CBDC later for the RBI. However, it is expected at a different time and not right away.
These media reports have been welcomed by some crypto investors and some expressed their relief at not having to worry about a complete ban. Some enthusiasts were pleased at the turn and shared that the government was finally noticing the crypto movement in the country and looking at crypto regulation and not thinking about legal tender. There were people who added that they wouldn’t mind paying tax on their crypto profits, but did not want to be outcasts by having to suffer through a crypto ban.
However, there were also those who were not pleased with the reports because they said they would be allowed to use only Indian exchanges and would not be able to maintain hard wallets, since the reports indicate that only exchange wallets would be permitted. This is risky and can also compromise the privacy of the users.
