Crypto Bill 2021 First Step Towards Building Deeptech Expertise In India

Crypto Bill 2021 First Step Towards Building Deeptech Expertise In India

The right crypto regulation will catapult India ahead in this innovative technology while wrong regulation such as a ban on Crypto will set our country back by 10 years

With the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, India will decide if it is for or against innovative technologies

In 2019, the draft bill was going by the name of “Banning of Cryptocurrency and regulation of official digital currency”. It’s interesting to notice that this time around, there’s no mention of a ban in the bill name. The first part says that there will be a regulation to help RBI create its own CBDC. This is a good thing that the government has shown intent for a CBDC (central bank digital currency) and wants to initiate laws to make it easy for RBI to create its own CBDC. In fact, we believe that the RBI must get a digital version of INR in sync with how China, the US etc. are trying for their own currencies.

However, the second part is about banning private cryptocurrencies with some exceptions. Now, what exactly is a private cryptocurrency? Bitcoin, Ether etc. are public crypto built on public blockchains. The use of incorrect terms such as “private cryptocurrency” or the fact that there’s a thought process which says RBI creating its own crypto removes the need for other cryptocurrencies is a misnomer that we need to clear. Existing cryptocurrencies such as Bitcoin, Ether etc. have their own specific use cases. They are needed to run smart contract and write to the distributed ledger that they’re built on top of. People cannot use INR to pay for fees on the Bitcoin or Ethereum Blockchain. Let’s get this misconception out the door. Every blockchain needs its own native token to operate. INR cannot be used in such cases.

I believe that the government’s concern here is around the usage of crypto as a “currency” or as a payment mechanism. As an industry, we’re in sync with the fact that INR is the only legal tender in India, and about crypto being an asset/utility which people buy and sell. But the thing that is unclear and something that we believe will be in the right direction – is that crypto as an asset and its trading will be allowed in India.

As of today, there are over 7 Mn people who own over $1 Bn worth of digital assets in India. Cryptocurrency is a sunrise sector employing thousands of people in India. There are also tens of thousands of influencers in crypto from India. I’m optimistic that the government is not going to simply ban crypto.

There are agendas and then there are actions. Governments around the world claim they want to support innovative and cutting edge technologies such as AI, ML, Blockchain etc. However, in order to really make a positive difference and go ahead in these technologies, deep expertise is needed. Unfortunately, India hasn’t yet been able to create deep crypto expertise. The lack of regulatory clarity and the hostile nature towards this innovation is to blame for this situation.

As of now, we know that this bill is included in the list of bills to be presented in this Parliament session. If it’s presented, then it will be referred to a standing committee so that they hold discussions with the crypto industry of India before moving ahead with regulations for this sector. After all, this is a really important bill that involves both finance and technology.

Overall, this is a great move forward as it gets us closer to regulations. Regulation is what I’ve been personally pushing for with my #IndiaWantsCrypto campaign as well.

The right crypto regulation will catapult India ahead in this innovative technology while wrong regulation such as a ban on Crypto will set our country back by 10 years. We’ll never be able to catch up with the rest of the world and end up losing a golden opportunity in this sector.

I hope our leaders at least discuss with us industry participants to understand the ground realities of Crypto before going ahead with any bill around this technology.

Crypto industry urges government to reconsider ban

NEW DELHI: The domestic cryptocurrency industry has been urging the Center to reconsider its apparent plan to ban private cryptocurrencies, like Bitcoin, in India. Industry stakeholders said while the government’s intention to create a Central Bank Digital Currency (CBDC) is a welcome move, the definition of what the government considers “private cryptocurrencies" will be important.

The Indian government’s plan to “create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India (RBI)," was announced in the agenda for the upcoming Budget session of Parliament. The legislation seeks “to prohibit all private cryptocurrencies in India", the agenda said. It is meant to allow the use of blockchain technology, which is the underlying tech behind cryptocurrencies, but many expect that it will make the use of currencies like Bitcoin and Ethereum illegal in the country.

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“The digital currency bill to be introduced in the Lok Sabha is a welcome step. Its success will depend on the details, particularly the definition of what the bill calls ‘private cryptocurrencies’. This is not a common term. Bitcoin is not privately owned by anyone. It is a public good, like the internet," said Rahul Pagdipati, chief executive officer (CEO) of crypto exchange and wallet ZebPay.

Industry executives say the government’s concern is likely about the possible use of cryptocurrency as an alternative to the Indian rupee (INR). They argued that cryptocurrencies instead are similar to assets such as gold. “As an industry, we’re in sync with the fact that INR is the only legal tender in India and about crypto being an asset/utility that people buy and sell," said Nishcal Shetty, founder of WazirX, India’s largest cryptocurrency exchange, which was acquired by Binance, the largest crypto exchange in the world.

“Bitcoin and most crypto assets are more like gold and not an alternative to government-issued legal tender," said Pagdipati. “Crypto assets and digital government currency can coexist and together," he said.

The industry has urged the government to consult stakeholders before coming to a decision. “We urge the government to take the opinion of all the stakeholders before taking a decision that may affect the livelihood of the entire workforce employed in the digital asset industry in India," said Shivram Thukral, CEO of BuyUcoin, another cryptocurrency exchange and wallet. “We have faith in the government and hope that this bill will move India forwards, not backwards," said Pagdipati.

India has considered banning cryptocurrencies once earlier. The government had floated a draft bill for “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill" in 2019. That bill proposed a fine or imprisonment of up to 10 years, or both, for mining, holding, selling, trade, issuance, disposal or use of crypto in India. The Reserve Bank of India (RBI) had also issued a circular in 2019 that banned banks and other regulated entities from doing business with crypto companies. This was struck down by the Supreme Court last year.

According to data from analysis firm Venture Intelligence, investments worth $24 million went into crypto firms in 2020, after the Supreme Court’s decision, up from a mere $5 million in the year before. Crypto firms in India have also experienced a successful year since the lockdowns in March 2020. Trading on crypto exchanges increased manifold, while Bitcoin’s sudden bull run in December brought in more investors too. The government’s current move threatens to put the future of this industry in disarray once again.

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India will propose a law banning private cryptocurrencies like Bitcoin

A formal ban would be a long time in coming. India rejected cryptocurrency as legal tender in 2018 and recommended banning existing digital cash with prison sentences up to 10 years for violators. The Reserve Bank argued the currency wasn’t real as it had no physical counterpart and hadn’t been stamped. The country’s Supreme Court sided with objectors and allowed trading in 2020, but that wasn’t expected to have a lasting effect.

It wouldn’t be hard to see why India would want to ban private crypto in favor of a government solution. An official currency would give the country more control that limits foreign influence, but it would also provide the kind of stability associated with conventional money. Prices for Bitcoin and similar currencies still tend to fluctuate wildly, and they’re more prone to manipulation. In theory, India can embrace digital-only currency without some of the pitfalls.