India’s Crypto Investors Weigh Options Ahead Of Impending Ban

India’s Crypto Investors Weigh Options Ahead Of Impending Ban

The prospect of a fresh ban on cryptocurrencies in India has sent an army of crypto investors scrambling to think of ways to protect or liquidate their holdings. This, as the government appears to be in final stages of bringing in a new legislation governing Bitcoin and other such tokens in India.

On Thursday, BloombergQuint reported that India will go ahead with a complete ban on investment in cryptocurrencies via domestic and foreign exchanges, after giving investors a transition period of three-to-six months. The full contents of proposed cryptocurrency bill are not in public domain.

While there is no official data available, the three largest crypto-exchanges—WazirX, Unocoin and CoinDCX—claim that there are anywhere between 60 lakh to one crore cryptocurrency holders in the country with holdings of over Rs 10,000 crore.

These crypto investors are looking at options ranging from ‘self-custody wallets’ to transferring and selling their tokens. To be sure, provisions included in the upcoming legislation, once detailed, will eventually guide these choices.

Option 1: Move Towards ‘Self-Custody’ Wallets

One option being explored by crypto investors is to move their holdings into ‘self-custody’ wallets.

This means that investors could either store their digital wealth in a hard wallet, which is a small digital device like a USB drive, microSD card or a smart card. This device stores the investor’s private bitcoin key/s and can be locked away at a safe place or sent to a friend or relative. Some of the popular hardware wallets for storing bitcoins include Ledger, Trezor, Exodus and BitLox.

Further, there are online self-custody wallet services provided by global firms such as Blockchain, Electrum and MetaMask, among others.

Youtuber Aditya Singh, who runs a channel called ‘Crypto India’, told BloombergQuint that many cryptocurrency investors have reached out with queries on how they could stash their digital tokens away from cryptocurrency exchange wallets.

“There are multiple ways to do that (store cryptocurrency) but the easiest is to take the custody of your wallet,” said Singh. “Investors who are worried that it might be end of the road for cryptocurrency in India are shifting their virtual currencies from exchange custody to self-custody online or hardware wallets,” he said.

However, there is a caveat. If a cryptocurrency is transferred via a wallet that exists on an Indian exchange, authorities can track it down if they want.

“Even as the blockchain system is decentralised, the know-your-customer norms followed by the country’s exchanges require users to reveal their identity and that could be a way for authorities to trace it back to the person who holds cryptocurrency in the exchange’s wallet,” said Singh.

Option 2: Transfer To Friends/Family Overseas

The other option that cryptocurrency investors can also explore is transferring their crypto-tokens from their wallet to their family or friends living abroad, ahead of the impending ban.

“This should not be an issue as investors could easily transfer bitcoins from their wallet and send it as a gift to their friends or relatives to their wallets before the ban gets enforced,” said Sathvik Vishwanath, co-founder and chief executive at cryptocurrency exchange Unocoin.

However, he said this could happen only if the Indian investor gives up the ownership of those bitcoins. Once the transfer happens, the receiver of those crypto currencies would become liable to pay tax on those assets in their home country.

But according to Anirudh Rastogi, the founder and managing partner at Ikigai Law, the ability to do this would depend on the provisions of the bill. “While the draft needs to be reviewed to get more clarity on whether this would be allowed, it is expected that Bitcoin investors will have to liquidate their holdings one way or another,” Rastogi said.

Option 3: Sell And Exit

The third option is to simply sell and exit. There isn’t much evidence yet of any panic selling, though.

“Right now, panic selling is only among the relatively new crypto investors who began investing during the Bitcoin rally and have only done so speculatively,” said Vishal Gupta, co-founder of Bitcoin Alliance India, a non-profit organisation that educates people on cryptocurrency.

Vishwanath told BloombergQuint that even though there has been some increase in wallet withdrawals in February, the change is not significant.

“We have no way to determine how the end-user is storing their cryptocurrencies, but the increase in withdrawals has not been significant anyway,” he said. “Even all our banking relationships are intact as there is no way to find out the final outcome of the new bill yet,” he said.

WazirX Founder Nischal Shetty echoed that.

“Our investors are in for the long haul and we have not seen any big increase in wallet withdrawals, save a case or two." he said. “In case a ban is imposed, it will only result in an underground cryptocurrency market forcing genuine investors to function in an unregulated environment. That would serve nobody’s purpose.”

India Grants Crypto Holders Reprieve Ahead of Likely Ban: Report

Policymakers in India will provide a transition period if a proposed ban on cryptocurrency usage is passed as expected.

According to a report by Bloomberg on Thursday, a senior Financial Ministry official – speaking under condition of anonymity – told Bloomberg cryptocurrency holders were likely to be given a three- to six-month period to close their positions.

Those still holding digital assets after the window closes will likely see their investments liquidated, per the report.

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After that, cryptocurrency usage in all aspects will be banned via a new law set to be introduced in the current parliamentary session via the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

See also: India Would Ban Private Cryptocurrencies Under Proposed Legislation

The bill is also expected to provide a framework for the Reserve Bank of India to issue its own digital currency.

Indian Official Provides Updates on Crypto Bill and Transition Period for Crypto Holders: Report – Regulation Bitcoin News

Indian Official Provides Updates on Crypto Bill and Transition Period for Crypto Holders: Report

As the Indian government gets closer to moving forward with the cryptocurrency bill, an official from the Ministry of Finance reportedly explained what discussions the government has been having regarding the crypto bill and the impending legislation.

Indian Crypto Bill’s Progress Update

The Indian government is getting closer to introducing the cryptocurrency bill in Parliament. On Friday, CNBC TV18 and Bloombergquint provided some updates on the status of the bill and what discussions the government has been having regarding cryptocurrency. However, both news outlets cited anonymous sources.

According to Bloombergquint, “India will go ahead with a complete ban on investment in cryptocurrencies, while providing existing investors a transition period to exit the holdings … this would include a ban on transacting directly via foreign exchanges.” The publication cited “a senior finance ministry official on condition of anonymity.” The official also clarified that the ban will not be enforced overnight, noting:

Cryptocurrency investors will be given a transition period of three to six months after the implementation of the new law to liquidate their investments.

The official added: “India’s new law will be modeled on China’s regulatory regime, which has effectively banned on trading and usage of cryptocurrency, while the government is working on issuing its own virtual currency.”

Another update regarding the Indian crypto bill came from CNBC TV18 on Friday. The news outlet wrote, “Sources suggest the government is discussing rules on the Indian cryptocurrency framework and it’s likely to spell out the modalities soon.” Reporter Timsy Jaipuria explained that the rules will entail “the time period which will be given to withdraw from existing cryptocurrencies.” She noted that this was supposed to be around three months according to 2019 discussions. The framework will also specify how the central bank, the Reserve Bank of India (RBI), will derive the value of India’s official digital currency and the penalties for not complying with the rules.

Many people in the crypto community in India are reluctant to believe news from anonymous sources, questioning their credibility. Many times in the past, various news outlets reported that the government was planning to ban cryptocurrencies but there has yet to be an official announcement. Crypto influencers in India suggest that people do not speculate and wait for the official announcement from the government or the actual bill to be disclosed.

Meanwhile, the crypto community has launched a campaign to convince lawmakers to regulate cryptocurrencies instead of imposing an outright ban. Even amid the uncertainty of the crypto legislation, the crypto industry in India is booming, boosted by bullish news from outside of India such as Elon Musk’s Tesla buying $1.5 billion worth of BTC.

The “Cryptocurrency and Regulation of Official Digital Currency Bill 2021” has been listed to be introduced in Lok Sabha, the lower house of India’s Parliament, during the current Parliament session. However, there are reports that the government may fast track the bill.

Several questions regarding cryptocurrency have been asked in Rajya Sabha, the upper house of India’s Parliament, since the beginning of this month alone. Firstly, the government clarified its stance on cryptocurrency and the digital rupee, then the government explained that the bill was being finalized. The most recent questions were answered by the finance minister herself regarding the government’s plan for cryptocurrency legislation.

Do you think India will ban bitcoin? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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