The government will take a different approach to regulating cryptocurrencies in India, which will be different from Western markets, said the chairman of the Parliamentary Standing Committee on Finance Jayant Sinha during an online event. The legislator’s most recent comments come amid uncertainty among Indian stakeholders due to the long expectation of regulation for Bitcoin and other encryption tools. The country has a strong base of cryptocurrency exchanges and investors, but so far has not recognized cryptocurrencies as an asset or legal currency.
Speaking at the HODL 2021 cryptographic asset conference, organized by the Blockchain and Crypto Assets Council (BACC) of the Internet and Mobile Association of India (IAMAI), Sinha said that India would not follow the US, Japan or El Salvador in its approach to towards cryptocurrencies.
“Our solution will have to be distinct and unique to India, simply because of our unique circumstances,” said the MP and former Minister of State for Finance.
He also said that the cryptocurrency regulation process would involve “stakeholder consultations” after obtaining parliamentary approval.
“It would be nice if we had global standards and then if there was something above and beyond global standards that was unique to India that could also be developed and worked on,” Sinha said.
The legislator also noted that the country needs to consider cryptocurrency legislation that bears national security concerns in mind.
In late January, the government proposed a bill to ban “all private cryptocurrencies” in the country and develop a framework for creating an official digital currency issued by the Reserve Bank of India (RBI). A few days after this project was listed in the Lok Sabha bulletin, State Finance Minister Anurag Singh Thakur said in responding to a question raised in Rajya Sabha, saying the government “does not consider cryptocurrencies legal tender or coins” . He also stressed that the government would take all steps to eliminate the use of cryptographic assets in financing illegal activities or as part of the payment system.
Those two main activities, along with an earlier RBI ban on cryptocurrencies that was overturned by the Supreme Court last year, have raised concerns among investors in the country.
However, key stakeholders in cryptocurrency are optimistic and see Sinha’s new comments as an indication of a positive move by the government.
“We agree with what Mr. Sinha mentioned,” said Avinash Shekhar, Co-CEO of the Singapore-based ZebPay cryptocurrency exchange. “India has its own unique strengths and issues when it comes to implementing laws and regulations around encryption and we are looking forward to a regulatory framework that meets these unique needs.”
Shekhar moderated the session with Sinha during the online conference. He expressed the need for an open discussion to address government concerns.
Nischal Shetty, CEO of the Indian cryptocurrency exchange WazirX, said that demand for cryptocurrencies has been steadily increasing in the country and that government action could be a significant boost to the crypto ecosystem as a whole.
“We are optimistic and look forward to working closely with the government on regulating cryptography in a way that encourages innovation. We also hope that the government will consult the sector’s actors and take into account their recommendations before finalizing the bill”, he said.
Sharan Nair, business director of the Bengaluru-based cryptocurrency trading platform CoinSwitch Kuber, also agreed with the comments made by Sinha.
“The laws around cryptography cannot simply be replicated from how other countries handle cryptography,” he said. “In this process, cryptography exchanges like CoinSwitch Kuber are more than willing to work closely with regulators and lawmakers to come up with laws that keep the country’s interests in mind.”
Similar to Indian cryptocurrency exchanges and trading platforms, global participants in the cryptocurrency market are also seeing the country with enormous potential to help increase digital currencies around the world.
“Once we have the regulatory framework for cryptocurrencies in place, the industry will be well positioned for growth,” said Vincent Lau, Executive Director, International Operations, Seychelles-based Huobi Global. “We will continue to develop our operations to meet the requirements of India’s regulatory environment as part of our global expansion strategy.”
Market analysts believe that while it is difficult to reach a judgment simply from the comments made by the legislator, the administration appears to be emphasizing a belated approach to playing it safe in the field of cryptocurrencies.
“India’s hesitation to welcome cryptos is understandable and it will take some time before it is widely accepted,” said Fawad Razaqzada, market analyst at London and Melbourne-based brokerage ThinkMarkets.
He added that Sinha only highlighted some of the known challenges India would face with the adoption of cryptocurrencies, including issues of governance, taxation and national security.
Edward Moya, Senior Market Analyst at OANDA, a multi-asset trading company based in New York, said India had a lot of resistance that it would not be an early adopter of Bitcoin.
“India is taking a cautious approach to cryptocurrencies and will not be able to create their own as they do not have full capital account convertibility. India has moved from banning cryptocurrencies to trying to figure out how they can make it work for them,” he noted.
Rajya Sabha member Amar Patnaik, who is also part of the Permanent Parliamentary Committee on Finance led by Sinha, emphasized the need for a strong regulatory framework for cryptographic assets in the country.
“The priority should be to put in a regulatory and innovation sandbox in the SEBI (Security Exchange Board of India) and the RBI and see the prototype of how it can marry the Indian system,” said Patnaik during his session at the conference.
According to various reports, India has around 15 million investors in cryptocurrencies and this number is continuously growing.
Globally, a report by Fortune Business Insights suggests that the cryptocurrency market will grow by 11.2% to USD 1,758 million (about Rs. 12,900 crores) by 2027.