Crypto buzz: What’s at stake?

Crypto Exchange boss Avinash Shekhar says lawmakers are likely to impose “tough” restrictions on the crypto market while the very lawmakers try to allay investors’ fears; here is all you need to know about the C-word and what the bill holds for the market. 

The Blockchain and Crypto Assets Council (BACC) has estimated that between 15-20 million people own cryptocurrencies in India. The crypto market- worth Rs 40,000 crores-crashed after the government announced the introduction of the Cryptocurrency and Regulation of Official Digital Currency Bill 2021  in the winter session of the Parliament. 

The government says that the bill aims at regulating the market and creating a ‘facilitative framework’ for the introduction of official digital currency that is to be issued by the Reserve bank of India. The clause of ban on private cryptocurrencies- with certain exemptions- has made investors anxious and led to the crash in the market. 

What do we know so far?

From the clauses of the announcement report to the market ups and downs, here’s a timeline tracing the developments that have happened in the past three days.

How did crypto emerge as a booming market?

Time and again, the RBI has expressed concerns over private cryptocurrencies posing risks to macroeconomic financial stability. The Securities and Exchange Board of India (SEBI) too has been reluctant about the untapped growth of private cryptocurrency in India.

To get a hang of the growth and evolution of private cryptocurrency in India, tune into ACJ shots, our weekly explainer podcast. (followed by audio)

The crash that followed

In response to the central government’s to introduce the cryptocurrency regulation bill in the winter session of the parliament, Bitcoin prices fell to its lowest.

After the Prime Minister Narendra Modi chaired a high-level meeting with officials of the Reserve Bank of India (RBI) and urged stakeholders to cooperate in the government’s bid to streamline virtual currency, otherwise, he said, “the market would fall in wrong hands and spoil the youth.” 

Hours after the government’s announcement, all cryptocurrency  saw a fall of around 15-17%, with Bitcoin down by 17%, Etherium by 15% and Tether almost by 18%. 

From the horse’s mouth: What do experts think?

While some market experts say that the implementation of the bill would mean the wiping out of all existing cryptocurrencies from the market, others remain hopeful that the legislation will regulate the market for the better. Nishchal Shetty, CEO WazirX India, says that a ban on private cryptocurrencies does not mean a clampdown on the entire Blockchain ecosystem. Others, however, say that the regulation bill will hamper the booming FinTech space. 

FinTech space in danger, experts express anxiety

Catch market analyst Vedanta Agarwal live on ACJ Explains. 

What awaits India: China’s blanket ban or US’ flexible curb? 

The legal status of cryptocurrency is evolving across the world. Some nations have imposed considerable restrictions on use of Bitcoin, China is among the few countries to have banned private cryptocurrency.

While the United States, a significant reference point for Indian investors, welcomes Bitcoin payments, different states have their way to deal with it; the Federal government disagrees with the legality of the crypto, whereas some states have upheld it. In Canada, such transactions are viewed as barter and are recognised as business income, but some banks have banned the use of cryptocurrencies. Crypto here is considered an asset for capital gains. In the UK, the crypto is under specific tax regulations, while in Germany, it’s legal, but it is taxed differently, but the organisations can deal with crypto if it’s licensed by the German Federal Supervisory Authority. Coming to China, which, as many experts speculate, can be the blueprint for India’s future crypto-policy, there is a blanket ban on private cryptocurrency.

El Salvador is the only country that has approved bitcoins as legal tender; the US, Canada, Australia, The UK, Germany are the countries that have an open and positive outlook towards bitcoin.  What the future holds for Indian investors is yet to be seen.