Is India about to ban cryptos? Here’s what might happen

Highlights

• India’s prime minister lately chaired a meet that deliberated on cryptocurrencies’ risks
• The country’s Supreme Court lifted a ban in 2020 imposed by the central bank in 2018 on crypto services by banks
• A bill may soon be tabled in the country’s parliament to decide how to regulate cryptos in India

There is a lot happening in the crypto world apart from Bitcoin scaling new peaks and meme token Shiba Inu soaring in value.

In July, a time when crypto watchers were focused on BTC losing as much as half of its value, Senators were debating the impact of cryptocurrencies on the financial system. Sen. Elizabeth Warren ripped into crypto assets and expressed her concerns over the vulnerabilities they bring to the economy.

Is India about to ban cryptos? Here’s what might happen

Likewise, many other countries are deliberating on cryptocurrencies in the wake of rising participation of retail investors in this investment class. India, an emerging economy, is one of the countries where crypto investment has become a hot subject in government and regulatory bodies’ meets.

Also read: Are cryptocurrencies any good? The US Senate doesn’t think so

Prime Minister Modi on cryptos

PM Modi remains a popular politician in India and his ruling party has enough seats in both houses of the parliament to bring any law on cryptocurrencies. The Press Trust of India, largest news agency in the country, has reported that the PM chaired a high-level meeting last week where concerns were expressed over cryptos’ use in terror financing.

The meeting also discussed proliferation of crypto exchanges in India and ‘non-transparent advertising’, which lures young investors toward a risky asset. According to reports, the ‘evolving technology’, which powers cryptocurrencies, was not condemned, and it is being said that any approach toward blockchain would be forward-looking.

Also read: Explained: Cryptocurrency categories – DeFi, NFT, Metaverse

Indian regulators on cryptos

The history of cryptos in India has been anything but a smooth ride. The country’s central bank, RBI, had banned banks from crypto dealing in 2018. This was a time when price rally in major cryptos had come to a halt. In 2020, during the phase of resurgence in cryptos, the country’s Supreme Court revoked this ban.

Shaktikanta Das, the governor of the RBI, has expressed worries about the ‘serious threat’ of cryptos to the financial stability of India. Das lately addressed a banking community meet where he called out the manner in which online platforms provide initial credit to users to trade in cryptos. Das, however, stated that the regulator needs ‘deeper discussions’ on cryptos to make ‘well informed decisions’

Just a day after PM Modi’s meet on cryptos, a parliamentary panel discussed them at full length. This also had participation of representatives of crypto exchanges in the country and the Crypto Assets Council. As per reports, the meeting ended with a wider consensus that the space warrants regulatory oversight.

Also read: 5 breakout altcoins with metaverse underpinning

What might India do with cryptos?

Though it is yet not clear, it is likely that the government would steer clear of any sweeping ban on this investment class.

The country’s securities regulator, Securities and Exchange Board of India (SEBI), might be designated as the regulatory body for crypto investments. The top judicial body of India has had struck down the ban on cryptos, and this could become a guiding light for future policy action. The country’s decision-makers would also consider developments like El Salvador’s recognition of Bitcoin as legal tender, and the bill proposed in Brazil that seeks making Bitcoin legal for payment purposes.

It is likely that while the country may bring cryptos under regulatory oversight, their use in transactions and payments systems may remain prohibited.

Also read: Is Bitcoin better than gold as hedge against high inflation?

Bottom line

India is a major emerging economy with a sizeable young investor class. Cryptos have been seen by many prominent investors, both institutional and individual, as a hedge against inflation. But risks too cannot be overlooked. The country may soon table a bill in the parliament to define broad contours of investments in cryptocurrencies, stopping short of declaring them a legal tender.