Investors wait for Budget to unveil future of Bitcoin

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By Express News Service

BENGALURU: On Friday, when Tesla CEO Elon Musk simply wrote #Bitcoin on his Twitter Bio, the cryptocurrency soared 14 per cent to touch a two-week high of $36,901 (roughly `26.9 lakh) value. When the world’s richest man says it, people listen!

Musk’s 43.8 million followers, including many Indians, went into a crypto frenzy, debating whether the investments in digital currencies are back on track.

After rallying 300 per cent last year, when people compared Bitcoin with traditional favourite asset gold, January saw its value decline to below $30,000 until Musk’s declaration of love for crypto.

Last month, he even hinted at converting some part of Tesla’s transactions into digital currency.

Back in India, Bitcoin fans are now not as upbeat, especially because the government may soon be banning all the private digital currencies.

A Bill will be reportedly tabled in Parliament during the Budget session aiming to introduce an official digital currency through the Reserve Bank of India.

The new law will also make certain exceptions pertaining to the technology which is crucial to cryptocurrency.

Ever since the Supreme Court overturned the 2018 RBI-imposed ban on cryptocurrencies in March 2020, investors as well as the crypto exchanges in India have been throwing their weight behind it by pouring money into digital assets.

The Indian banks had also started allowing investors/ traders to trade on the platforms using their bank accounts which resulted in a huge surge in digital asset owners.

However, now, the investors are advising wait-and watch policy for clarity in the regulatory environment.

“We have heard that the Bill is most likely to be passed in Parliament soon. This will result in an unprecedented sale of Bitcoins at exchanges. In India, a trend seen on the exchanges is holding Bitcoins for medium term (3-5 years) in wallets much like any other asset. However, we are most likely going to see a surge in trading and sale of cryptocurrencies,” Manjunath Shetty, a retail investor and an engineer said.

The change in regulations in India have come at a time when the global investment majors as well as businesses have placed their bets on Bitcoin for the long term and eventually taking the crown off gold as the choice asset.

“Indian investors are usually averse to high-risk trading, which crypto currency is. However, the millennial and the educated class have shown interest in Bitcoin lately. It may be sometime before we see a huge sale of Bitcoins on exchanges in India,” Shetty added.

Why mull a ban

Governments around the world have been looking into ways to regulate cryptocurrencies but no major economy has taken the drastic step of placing a blanket ban on owning them, even though concern has been raised about the misuse of consumer data and its possible impact on the financial system

Union Budget 2021: What cryptocurrency industry is expecting from budget

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The value of the world’s most popular cryptocurrency Bitcoin crossed $30,000 for the first time during the coronavirus outbreak. With intrigue in digital currencies at a record high, it would be interesting to see what the Union Budget 2021, which will be presented today, has in store for the cryptocurrency industry.

The digital currency platforms in India are quite hopeful that the government will make Bitcoin and other cryptocurrencies interoperable with the current banking infrastructure.

“The business of crypto assets has expanded manifold across India in the last few months. Trade volumes are growing exponentially, and the industry boasts many loyal enthusiasts. In that context, cryptocurrency exchanges could be the first point of regulation by bringing them under SEBI through a structured regulation setup,” Darshan Bathija, CEO of Vauld, a homegrown cryptocurrency platform, said.

He added positive crypto regulations will lead to tremendous growth in the crypto space. “Our expectation is that this will further encourage investors to consider cryptocurrency as a viable banking instrument and asset, by making it interoperable with the current banking infrastructure, offering attractive interest rates. Secondly, blockchain as the greatest disruption of the century isn’t far from transforming and subverting the traditional financial and banking systems across the globe. In fact, usage of blockchain technology across sectors should be boosted further,” he added.

Rahul Pagidipati, CEO, ZebPay, said crypto assets, if properly regulated, could bring tremendous economic benefit. “The government’s twin goals of promoting prosperity and protecting people from fraud and harm are our goals, too. That’s why we have world-class security, KYC, and AML policies. We hope 2021 will bring healthy regulations for crypto investors, so they can know how to pay taxes correctly and access all the potential of this revolutionary new asset class,” Pagidipati said, reported Mint.

The cryptocurrency industry believes the government has recognised the huge potential of blockchain technology and the economic benefits that cryptocurrencies can provide. This is evident from a recent proposal put forward by the Central Economic Intelligence Bureau (CEIB), an arm of the union Finance Ministry, which said the government should impose 18 per cent GST on Bitcoin transactions. The government could potentially gain Rs 7,200 crore annually on digital currency trading, as per the CEIB.

The proposal came after the Supreme Court in 2019 asked the government to come up with cryptocurrency regulation policies. In 2020, the apex court also struck down the curbs imposed by the RBI on cryptocurrency trade in India. The RBI had virtually banned cryptocurrency trading in 2018 and had directed that all entities regulated by it shall not deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling those digital currencies.

Recently, the RBI also stated that it is examining if there is a need for introducing a central digital currency (CBDC) in the country. With intrigue in digital currencies at a record high, it would be interesting to see what the Union Budget 2021, which will be presented today, has in store for the cryptocurrency industry.

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Presently, there are no specific laws for investment in cryptocurrencies which prevents many people from investing in them. (Photo source: Reuters)

By Kumar Gaurav

Union Budget 2021-22 Expectations for Startups: When it comes to the term ‘cryptocurrency’, it gets difficult for most people to understand because of its technical aspects and use. Thus, in layman’s language, the word ‘cryptocurrency’ can be defined as digital money or virtual currency used by people to make transactions without the involvement of any third party, that is, banks. The transactions made through cryptocurrencies are fully encrypted and secured. This makes them one of the safest investing options. Most of the cryptocurrencies use blockchain technology which gives them full protection from stealing confidential information or counterfeiting by storing transactional information in highly coded blocks. Ether and Bitcoin are the most popular examples of cryptocurrencies.

Was Union Budget 2020 beneficial?

With the advent of rapid digitalisation, more and more people want to invest in cryptocurrencies due to their growth potential and security of transactions. But the question which cannot be overlooked here is that how concerned is the government regarding the growth and use of cryptocurrencies? In Union Budget 2020, Union Finance Minister Nirmala Sitharaman talked about various valuable tax reforms brought up by the government for the dwindling MSME and startup sectors but did not talk about any reform for the cryptocurrency startup industry. This was specifically when some reforms and measures were badly required. Thus, Union Budget 2020 did not prove to be constructive for the cryptocurrency startup industry.

Ray of Hope

On April 6, 2018, the Reserve Bank of India (RBI) imposed a ban on the holding and trading of cryptocurrencies in India. This was because of the outlook that cryptocurrencies could impact the working of the banking system and be used in promoting money laundering and terrorism due to the anonymity of transactions. But, on March 4, 2020, the Supreme Court rescinded the ban imposed by the RBI. This came as a relief for cryptocurrency startups.

With the upliftment of the ban imposed by the central bank of India, many cryptocurrency startups witnessed multiple folds of growth in their users. Numerous crypto startups could raise millions of dollars through the investments made by both Indian and foreign investment firms. International crypto players started investing in the Indian market through mergers and acquisitions. This helped the cryptocurrency sector to gain momentum while fighting against the deadly pandemic.

Also read: Budget 2021 Expectations: MSMEs, startups seek better debt access, GST relaxation, more from FM Sitharaman

Challenges

For an industry that runs on high-end technology, it is normal to be surrounded by speculations. For people, where investing in a tangible asset has been the age-old concept, putting money in virtual assets can be a matter of hesitation. Also, the ban and early criticism did cause damage to the credibility of the sector. Like any new concept, even the cryptocurrency sector needs to be given time and support to be able to garner trust and create awareness.

Expectations

The upliftment of the ban has come as a saviour for cryptocurrency startups, and for further growth, the expectations of such startups are high from the Union Budget 2021. The cryptocurrency industry has the absence of a clear regulatory framework, and that is the biggest hurdle that is coming in its path of overall success. Startups want proper legislation regarding investment in cryptocurrencies from the government.

Presently, there are no specific laws for investment in cryptocurrencies which prevents many people from investing in them. A proper legal framework regarding cryptocurrencies will safeguard the interests of buyers and sellers. After the implementation of necessary laws, it will be easier to track the transactions, thus, leading to enhanced safety of transactions. If the government does not come up with such regulations, not only the cryptocurrency industry will suffer, but the country will lag behind the rest of the world in technological growth.

The second expectation of cryptocurrency industry entrepreneurs is funding. The pandemic has led to the bankruptcy of many startups, of which many halted their operations either temporarily or permanently. Thus, entrepreneurs from the cryptocurrency industry are expecting something like grants, loans at low-interest rates, and seed funding from Union Budget 2021 that will help their startups in the early stages and revival. The above-given information leads to the conclusion that for the bloom of cryptocurrency startups, the government needs to bring some laws and assist the startups with funds in the early stages of their business cycles. If not, then the nation would miss some essential opportunities and the larger aim of digital India would not be achieved completely.

Kumar Gaurav is the Founder and CEO of Cashaa. Views expressed are the author’s own.