More questions are swirling around cryptos than there are answers. However, considering the size that they have attained, the technology underlying them and the many benefits associated, a complete ban looks highly unlikely. While reports suggest some in the government are in favour of regulating it, the RBI has stood its ground on banning crypto products.
The recent raids are also seen positively as these continue to add clarity in the unregulated market. Given, the winter session did not bring any clarity on crypto assets, we are now looking for some guidelines through the budget. However, the chances remain slim.
Cryptos will stay
As long as the internet is going to stay, the crypto-assets are going to stay. Crypto assets are based on a technologically advanced concept called cryptography. Not just crypto assets but also a lot of networking, transaction and national & international security protocols use cryptography to send information. With keys and cypher codes, the information or data can only be received and understood by the recipient. A lot of technologists, coders, scientists and security personnel realize the value of this and believe in it. For them, crypto assets are the ideal way to transfer information related to finances.
Those who have no understanding or interest in cryptography, blockchain technology, or decentralization, but are game players in the financial world, also tend to try their hands in these new-age assets. Exchanges and trading platforms come into the picture here.
For those who neither come from a technical background nor a trading background, but would want to solve some major world financial problems, for them too, these crypto-assets come to the rescue.
Finally, civilians and taxpayers of any country, at the end of the day, would like to make some money. For that class of people too, crypto-assets have been a hot topic. People like to know how bitcoin has increased in price, why the price fluctuates, and how some people are getting amazing results by intelligently investing in it.
The road ahead
Crypto assets are going to stay. Laws and regulations will only regulate the way the transactions would be carried out. A forceful outright ban will push crypto activity underground and none of the regulators wants it that way. Remember demonetisation? The then central government came out with the law that the previous currency note will not be considered as a legit value. But did that mean people stopped paper-note transactions? No. There were alternatives as to transfer money via IMPS/NEFT/Bank transfer, card swipes and the then-popular UPI transfers. New currency notes were being introduced to the market too. People transacted the same way after a month after demonetisation as they did before. The law promoted more people to get banked, link their Aadhaar, do digital payments and go cashless.
The new bill might have a similar impact on how the use of crypto assets will be carried out. All that the government wants is to regulate the use of crypto-assets. The expectations from exchanges are that they trace, record and share every transaction detail that happens on their platform. The government also wants to make sure there is no illicit buying and selling of weapons, illegal activities, money laundering, terrorist activities happening which could be a major tragedy for the nation’s security. Shutting doors to crypto-assets would be like shutting doors to the future. Crypto-assets, as a technology, have something for everyone. It is not merely something that resembles gambling or unlawful activities.
What will be the future of crypto products in India?
There is an expectation that the government will adopt a middle path on crypto products and treat them as a form of asset that will come under Sebi. Sebi has been assigned to form regulatory norms for all the exchanges & brands that encourage crypto-assets transactions on their platforms. The government also plans to launch its digital currency that would directly come under the Reserve Bank of India (RBI). In that case too, as mentioned above, all we see is a shift of which assets can be used freely and which assets require scrutiny or tighter laws.
Moreover, as easy as regulating crypto-assets may seem, it is not going to be a cakewalk. It took almost half a century for our government to regulate census-related data via a single ID system called Aadhaar. The same amount of time was needed to bank every Indian citizen. After the advent of the internet in the late ’90s, it took almost two decades for our government to move people from cash-based transactions to internet-based transactions. So as long as there is no complete ban on crypto products, the crypto-assets are going to stay for long.
What will be on the minds of an average crypto investor right now?
Most average Indians are talking about it. The average Indian might halt for some time to invest any more money into assets. But chances of encashing or liquifying their long-held assets seem to be minimal as the government’s stand is not fully clear yet.
Those who are pro-investors would continue to trade as per their discretion and market fluctuation while keeping an eye on the NEWS around the bill.
And how smooth does the journey look for cryptos in terms of navigating regulatory roadblocks?
It majorly depends on Sebi officials. Sebi has not been so proactive and welcoming to the idea of it being considered as a regulatory body for cryptos. This is very new for them. This is new for India.
Taking a middle ground seems to be way too challenging. We are almost as densely populated as China but have not banned any assets as of now.
On the other hand, we also have not accepted crypto assets as openly as El Salvador, which would have made our lives fairly simpler. So considering that we have not been on either of the extremes (unlike China and El Salvador), the journey for cryptos in terms of navigating regulatory roadblocks doesn’t seem to be smooth, but achievable.
(The author is co-founder & CEO, Unocoin Technologies Private Limited)
