Cryptocurrency trading is still only nascent in India since it had been banned by the country’s central bank, the Reserve Bank of India, in 2018, following the crash in Bitcoin’s price which halved its value in just a couple of weeks. This decision was only reversed by the Supreme Court of India in March 2020, allowing people to trade in cryptocurrencies again, and it came at a time when Bitcoin and other cryptocurrencies had just started the current rally. This meant that there was a huge spurt in the number of investors and traders looking to get into crypto trading, with a number of exchanges opening up to serve this demand as well. However, less than a year after trading was finally opened up, it could all be coming to a halt once again, if a bill introduced by the government in Parliament makes it through and becomes law.
The Indian government is looking to ban cryptocurrency ownership and trading in the country, according to the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which is set to be introduced during the current Budget session of Parliament. While banning trading in private cryptocurrencies, it will however clear a path for the Reserve Bank of India to potentially introduce an official digital currency, in a step which has been taken by various central banks around the world, as they investigate the viability and potential of central bank digital currencies (CBDCs).
This potential move has already caused a lot of distress in the Indian crypto market, with the price on Bitcoin having dropped by around 10% on Indian markets following this news. Banning the use of currencies such as Bitcoin and Ethereum will cause quite a lot of disruption to many people and companies which had already begun incorporating crypto into their systems and operations, not to mention the money that could potentially be wiped out if crypto investments are made illegal. Sectors such as the online gambling industry, for example, have seen significant growth since adopting cryptocurrencies into their payment systems, and this is true for an Indian crypto site as well, given how popular cryptocurrencies are in the country, as well as gambling. This is just one example – there are many other businesses and industries that will be adversely affected, not least the crypto trading sector, which had only just begun to thrive since last year.
Many industry experts believe that the need of the hour is for effective regulation to be brought in, both to protect investors, as well as provide a framework for exchanges and trading companies to work on, rather than an outright ban on cryptocurrencies. There are also questions of interpretation since Bitcoin and other cryptocurrencies are not ‘private’ – they are not controlled by any one entity, while that would definitely be the case for any CBDC, which defeats one of the biggest reasons why cryptocurrencies came into being in the first place – decentralization of money. According to Naveen Surya, who is the chairman emeritus of the Payments Council of India, a separate committee needs to be established to investigate the pros and cons of cryptocurrency trading, before arriving at a decision. Opposition politicians have also been questioning this move, with Milind Deora, a prominent member of the Congress, the opposition party to the ruling BJP, stating that he believes that blockchain is the future, so the government and central bank need to embrace it, rather than fearing it. He also said that countries like China are researching CBDCs, so India must also do so, but not at the cost of the crypto trading market as a whole. Cryptocurrencies have already generated a lot of wealth, income, and employment in a short span of time in India, and so they should not just be discarded on a whim.
