Investors wait for Budget to unveil future of Bitcoin
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
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.
Government To Ban Private Cryptocurrency, RBI Introduces Official Digital Currency
With the likely scenario of India’s government banning private cryptocurrencies, the Reserve Bank of India (RBI) is planning to introduce an official digital currency for the country. The government is all set to introduce a Cryptocurrency and Regulation of Official Digital Currency Bill that will create a ban on the private cryptocurrencies in India. In light of that, RBI has been planning to develop a framework towards launching a digital currency.
The bill was initially proposed in 2018, by ex-economic affairs secretary, S C Garg with officials from SEBI and RBI. The aim of the bill now is to disallow all private cryptocurrencies in India, while providing certain exceptions to promote the underlying technology, stated in the Lok Sabha bulletin released last week. Though the team supported the ban, it was suggested that the rise of blockchain technology and distributed technology should continue for the BFSI sector to have a better loan monitoring, managing insurance claims and detecting frauds.
Despite the surge in the cryptocurrencies, the move will be taken so that Indian investors aren’t exposed to its risks like money laundering, cyber fraud risks, operation hazards, market risks, compliance errors and others such. Such a move will push India in line with countries like China, which has developed frameworks to launch official digital currencies.
With that being said, the proposed ban has turned out to be a concern for many companies. CEO of BuyUcoin, Shivam Thakral, stated to the media that the government should have consulted the stakeholders before making a decision that can affect many livelihoods.
Zebpay, another company that allows trading in bitcoin, has also stated that cryptocurrencies must be viewed as assets like gold. Thus such a ban should be implemented after careful consideration. He said the government should define the word ‘private cryptocurrencies’ and if bitcoin is included in the same, as no one privately owns it. He further believes that cryptocurrencies can easily co-exist with the government’s digital currency, and can bring tremendous benefits to the Indian economy.
While two year back, in the 2018 budget, former finance minister, Arun Jaitley mentioned the government’s plan to suspend bitcoin and other virtual currencies, leading to RBI banning such transactions, in 2020, Supreme Court of the country authorised people to buy and sell virtual currency. Many have termed this as a failure in the implementation of a regulation.
Another bitcoin and cryptocurrency exchange and trading platform’s founder Nischal Shetty of WazirX has even called out this move “amateurish,” where the government is confusing the country by presenting such vague technology-related bills. “There’s no such thing as a private cryptocurrency — crypto itself means decentralised and public,” said Shetty to the media.
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