India’s Cryptocurrency Regulations Scenario

Indian Lawmakers are finally going to introduce cryptocurrency regulations in their budget bill. Financial ministers and experts have concluded that banning cryptocurrencies won’t be reasonable, especially when the number of cryptocurrency investors continues to proliferate in India alongside blockchain start-ups’. Let’s take a look at India’s cryptocurrency regulations.

Back in 2018 when the Reserve Bank of India (RBI) had put an umbrella ban on cryptocurrencies. Later the Supreme Court outlawed it, claiming the ban as “unconstitutional”.  Since then, there has been a constant, the Supreme Court outlawed it in terms of the ban being “unconstitutional”. Since then, Indian financial regulators and ministers have been formulating a draft. 

The previously designed draft had restricted the linearity of all private cryptocurrencies in the country. The draft made a way for the RBI to issue Central Bank digital currencies (CBDCs). 

Indeed, this step towards cryptocurrency regulations seemed most appropriate to avoid the downfalls of cryptocurrency trading, such as finance laundering and monetary crimes. As the cryptocurrency market is decentralized in nature, it is difficult to regulate by anybody. Unlike the shares and stock trading market in India which is regulated by the Securities and Exchange Board of India (SEBI) which is a government-appointed functional body. However, banning cryptocurrencies will also end up restricting digital development in the country. 

Jaideep Reddy Explained Why Banning Cryptocurrency in India will “Stifle Development”

Cryptocurrencies are an essential agency for blockchain development, Image Source: Finjan Blog – Finjan Holdings

Jaideep Reddy had, a technology lawyer with Nishith Desai Associates (NDA) who is currently specializing in the field of cryptocurrency opined on a webinar The Framework: Crypto Regulation and India, conducted by the Business Insiders. He said, “Yes, theoretically, a government can say yes to CBDCs and no to private cryptocurrencies, but you have problems both from a development perspective — stifling the software ecosystem and creator ecosystem — as well as from a legal perspective, where it could be challenged that it is unconstitutional.”

As a crypto enthusiastic citizen of the country, I found the concept of banning private cryptocurrencies unreasonable and I concur when anyone states the ill consequences of cryptocurrency ban on the development of India.

The plethora of blockchain-based start-ups’ and applications India has adopted is uncanny. Not only private individuals and institutions are seeking blockchain for creating the next generation of tech-savvy services, but the state and central authorities are also going that lane. Earlier in 2021, Maharashtra, the third-largest state in India partnered up with LegitDoc. The latter is a blockchain start-up that produces certificates and official documents designed with a heavily encrypted technology that doesn’t allow forging or hampering the documents. 

Jaideep Reddy explained, “A lot of these blockchain use cases won’t work without a thriving and enabled cryptocurrency ecosystem.” 

These blockchains which are used for such noble and advanced work, require a heavily functional mesh of cryptosystem. The blockchain technology used by LegitDoc runs on Ether system – the second largest and one of the cryptocurrencies with a massive market cap. The cryptocurrencies are a power backup to these blockchains; also referred to as cryptosystems.

India Will Present the New Draft for Cryptocurrency Regulations in February 2022

A report from Business Today read, “Finance Ministry officials have told Business Today Television that a law for cryptocurrencies would most likely come around by the time of the next general Budget.”

RBI previously banned private cryptocurrencies, currently preparing for India’s cryptocurrency regulations draft which will be introduced in the next Budget session.

India has drafted and made amendments innumerable times. The country which celebrates its unique system of governing the most diverse population in the entire globe has made it official that their ways of cryptocurrency regulation will be “unique and distinct”.

Wazirx’s CEO Nischal Shetty commented with a tone of awe and pride, he said, “Great to hear that India plans to bring in a crypto regulation bill next year. Crypto has reached a stage where countries no longer talk about a ban. It’s now about ‘How to regulate.”

Well, every cloud has a silver lining. With time and patience, we shall know whether the Indian authorities provide a silver lining to the lengthy journey of cryptocurrency in the country.

Also Read: Indian Government Plans to Draft a New Cryptocurrency Bill

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