Have you invested in Bitcoins? Do you have a few coins of Ethereum, Binance Coin, or Tether? If yes, we are sure you are on tenterhooks trying to know if the Indian Government will curb cryptocurrencies or ban them.
The events of the last week could have been a flashback of January 29th, when the Cryptocurrency Bill was in the Lok Sabha for consideration. Crypto investors then sold their coins in panic, thought of moving bases, and some even stopped investing in Cryptos.
As soon as people realized the bill would not be tabled in the Parliament during the Budget Session, participation in this asset class rose steeply.
Thanks to the spurt in the launch of Crypto trading platforms in India like, CoinSwitch, Kuber, WazirX, etc. retail investors flocked to invest, and the exchanges flourished.
Everything was hunky-dory in the world of cryptos till the end of November, as Nirmala Sitharaman assured of a regulated approach to Cryptocurrency.
Come December, and this positive narrative towards the cryptos changed. The Lok Sabha bulletin for the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 said, “The bill aims to prohibit all private cryptocurrencies in India.”
A whiff of this news was enough for new crypto investors to panic sell. Per the Blockchain and Crypto Assets Council (BACC), a part of the Internet and Mobile Association of India (IAMAI), 15-20 million crypto investors hold 5-6lakh crore in crypto assets in India.
The panic-led selling meant Bitcoin and Ethereum fell ~15% on the local exchanges. Tether, the world’s largest stablecoin by market value crashed to Rs 60 on WazirX. Investors made the most of this dip.
Those following the events in India felt an outright ban was unlikely, and the government would put some regulations in place despite several RBI iterations calling cyrptocurrencies a major concern.
Why did the positive narrative change, and so quickly?
A fact-finding mission will tell you investors felt the flashy, rampant ads for crypto exchanges are to blame. These ads caught the Prime Minister’s attention. He said, “Ads should not mislead the youth.”
Crypto platforms wanted these ads to attract attention, and they got it in spades.
The story of the Crypto-world since January
Since January, retail investor participation and the crypto markets have grown exponentially. This increase contributed to the growth in the developer community, blockchain, and crypto projects.
Foreign investors felt India’s crypto market had potential and invested over $500 million in risk capital in cryptocurrencies. However, the uncertainties have made well-known funds suspend their investments or rethink their plans.
A few international venture capitalists are hoping for the introduction of innovation-friendly regulations. Some developers and founders looked for ways to shift their base to crypto-friendly countries like Singapore, Dubai, or Abu Dhabi. Large investors and project developers have moved their base already.
The Bill that was finally introduced
The Union finance minister proposed the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 last week, in the Lok Sabha.
They plan to prohibit mining, creating, holding, selling, or trading in digital currencies as a medium of exchange, a unit of account, or a store of value.
What does it really mean?
The regulation means to stop the use of cryptos as a payment method in India. Investors flouting the rules can be arrested without a warrant and held without bail. Moreover, the Government may impose fines.
This legislation comes on the heels of China’s crackdown on the crypto exchanges in September. Earlier, the Government said they would promote blockchain technology. However, the proposed rule may hamper the use of blockchain and NFTs (non-fungible tokens) in India.
Anirudh Rastogi, Founder of law firm Ikigai Law said, “If no payments are allowed at all, and an exception is not made for transaction fee then it will also effectively stop blockchain development and NFT.”
What’s more, the Bill seeks to curb the crypto-exchange advertisements that aim to woo new investors. Self-custodial wallets that let people store digital currencies outside the exchange could be banned too.
These proposed rules aim to safeguard the traditional financial sector from digital currencies, curb money laundering, regulate the crypto markets, and tax crypto earnings.
The finance minister has proposed the legislation. But whether the Lok Sabha clears it is still unclear. Everyone, including crypto-investors are waiting to see what happens next.
Let us know what you think of this bill. Meanwhile, share this article with your friends.
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