Indian government is reportedly taking a unique approach to regulate Bitcoin and other cryptocurrencies. The government will compartmentalise cryptocurrencies on the basis of their use cases and direct which cryptocurrency will be allowed to trade in India. This is way India plans to regulate cryptocurrency which is a little different from the way other countries are doing.
This development is in line with the earlier announcement from Indian Finance minister Nirmala Sitharaman. In March, the Indian Finance minister clarified that the government will not completely ban cryptocurrencies or at least the technology part of it.
“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 blockchain, bitcoins or cryptocurrency,” Sitharaman had said at an India Today conclave.
How India Will Regulate Cryptocurrency?
The Indian government is reportedly planning to regulate Bitcoin and other cryptocurrencies as commodities based on the use cases. “The government is planning to define cryptocurrencies in the new draft bill that also proposes to compartmentalise virtual currencies on the basis of their use cases,” The Economic Times reported Friday, citing three people aware of the development. The publication notes:
As per the reports, Cryptocurrencies will be treated as an asset/commodity for all purposes, including taxation and as per use case — payments, investment or utility.
“Crypto assets can be either categorized on the basis of the technology they use or they can be defined on their end-use. So, before talking about how the regulations should work, the government has to spell out what it means by cryptocurrencies,” said one of the persons with knowledge of the matter. The person added that the government “is not looking to allow payments and settlements through virtual currencies.”
Most importantly, the government will decide which cryptocurrencies will be allowed to trade in India.
This would be the first time cryptocurrencies will be categorized by the technology they use. The government will focus on the end-use of the virtual asset for regulatory purposes.
The news of the Indian government bringing clarity on cryptocurrency regulation is well received by the Indian crypto community.
Nischal Shetty, Wazirx CEO, said:
“This step is very positive for the crypto industry and I’m glad that the government is taking this direction towards crypto regulation. This will bring more clarity for the entire industry and push more entrepreneurs into this sector. It will reduce the fear of VC investors wanting to invest in the crypto industry in India. For retail investors and traders, this will again boost confidence and bring in a sense of stability.”
Crypto Investment In India Growing Exponentially
India is experiencing exponential growth in cryptocurrency investment and trading. According to Chainalysis, the total investments in digital assets in India is currently valued at over US$ 6.6 billion. The crypto market intelligence firm said that it was just US$923 million in April 2020.
The huge jump in investment is a testament to the growing demand for crypto investment in India. Indians are investing in cryptocurrency despite continuous disapproval from the Reserve Bank of India (RBI).
Cryptocurrency exchange CoinDCX Becomes India’s First Crypto Unicorn
In August, Indian cryptocurrency exchange CoinDCX raised US$90 million (Rs 668 crore) in a Series C funding round led by Facebook co-founder Eduardo Saverin’s B Capital Group. This funding boosted CoinDCX’s valuation to US$1.1 billion, bringing its status as a crypto unicorn.
India Crypto Policy – Series Of Events
The government was considering a blanket ban on crypto. A committee also suggested a jail term of 10 years for holding and trading cryptos.
In 2018, RBI issued a circular directing banks to not serve crypto exchanges. It was challenged in the court by crypto community in India. The court found the step unlawful and directed banks to provide services to cryptocurrency exchanges.
Indian crypto community kept engaging and educating policy-makers in India. It eventually forced the government to rethink their approach with the changing global scenario.
So, it would be really interesting to see when the official announcements comes. What is allowed and what is banned? But, it is definitely a big development.