Is India Ready to Legalize Cryptocurrency?



While the Supreme Court of India hears the crypto exchange industry’s case against the central bank following the latter’s banking ban, regulators are exploring regulatory policies for the nascent sector.

Businesses and associations in the cryptocurrency and blockchain sector are expected to participate in the hearing alongside the Securities and Exchange Board of India (SEBI), to discuss the long run of the cryptocurrency market of India.

In its annual report, SEBI disclosed that it's sent government officials to Japan, UK, and Switzerland to study cryptocurrency rules in overseas markets with active digital asset exchanges and communities.

Unexpected Variable

In July, the supreme court of {india|India|Republic of India|Bharat|Asian country|Asian nation} declined to reverse the ban on cryptocurrency trading imposed by the central bank of India, requesting banks to keep up a strict ban on providing any financial services to cryptocurrency-related businesses.

Speaking to Bloomberg, law firm Shardul Amarchand Mangaldas & Co partner Anand Bhushan said that excluding the government’s concerns concerning money laundering, there exists risk in allowing digital currencies as a medium of exchange because of a large quantity of speculation and volatility.

“Nobody is ready to cost the risk currently. The minute you've got clarity on exchanges and whether digital currencies can be used as a medium of exchange or payment, or if it's a commodity, there'll be less speculation and much a lot of stability in pricing,” Bhushan said.

But, as SFOX head of growth Danny Kim said, the doorway of large-scale investment firms into the cryptocurrency market has led to a rise in stability, as seen in the price movement of Bitcoin throughout August, when it recorded its most stable month since June of 2017.

“Before institutional firms were actively trading crypto or heavily concerned (before 2018) bitcoin worth variations between exchanges varied as high as 4.5%,” Kim explained.

The increase in stability, as well as the recognition of cryptocurrency exchanges as regulated monetary institutions by major regions such as Japan, South Korea, France, UK, and the USA may encourage India to reverse its ban.

Analysts expect that the exposure of local government officers to overseas markets that have demonstrated a high level of growth in the cryptocurrency and blockchain space may act as an unforeseen variable that may redirect the long-run strategy of SEBI.

As seen in the 50 % increase in cryptocurrency and blockchain-related job growth in Asia and the decision of governments to consider the blockchain as one of the three core technologies in the fourth industrial revolution alongside huge data and AI, a complete ban on cryptocurrency trading may lead to voluntary isolation.

As large the economy of India is, Europe has continuing to lag behind Japan and South Korea since 2012 in both trading volume and industry growth due to their initial rejection of the market.

This week, the eu Commission, the executive branch that drafts legislation for the EU, acknowledged the cryptocurrency sector as a legitimate industry, given the rapid climb rate of the market despite its volatility.

Valdis Dombrovskis, the vice president of the european Commission, said:

“We also had a decent exchange of views on crypto-assets. we see that crypto-assets are here to stay. Despite the recent turbulence, this market continues to grow.”

Risky Game

The government of India is following a high-risk strategy in isolating itself from the global cryptocurrency and blockchain space. Its current approach assumes that the cryptocurrency market of India may become a number one sector at anytime, as soon as a regulatory framework is established.

However, as demonstrated by Europe and the discrepancy in market structure between European nations and leading markets like Japan, it takes time, capital, and resources to create the market.

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