Central Banks all around the world had been issuing their own cryptocurrencies — some of them declared them to be legal tender and the rest took a wait-and-see approach. Owing to global trends in favour of cryptocurrencies, an obligation to protect human rights and on the basis of proportionality, the Supreme Court overturned the 2018 ban on crypto asset trading in March, 2020.
“When the consistent stand of RBI is that they have not banned virtual currencies and when the government of India is unable to take a call despite several committees coming up with several proposals, including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate,” the top court had said.
But there are other reasons why Indian authorities eventually had to concede to the rising popularity and public demand for bitcoin and the cryptocurrency industry as well. Virtual currencies enabled millions of Indians to participate in the global ecosystem of cryptocurrencies. They made transactions for Indians to any part of the world simpler, quicker and more cost-effective and empowered Indians to make informed choices on investing in one of the world’s highest performing assets. While in 2020 many industries crumbled, the crypto industry created thousands of jobs and helped employees retain their jobs and upskill.
There is a fair amount of hype around bitcoin when the prices are bullish. However, it is important to bear in mind that what gives bitcoin its value is its ability to enable fast and free transactions. Just as email communication made the transfer of information fast and free, technology like bitcoin has the potential to revolutionise money.
As of now, this has been seen as quite a speculative instrument but this is still a phase that it had to undergo to discover its own value so that it can be used for “value transfer” mechanism in the future generations. Moreover, we need to remember that most developed countries have stable currencies and the common public generally live on credit. But in India, the native fiat currency depreciates faster and there is a strong instinct to save among our population. This combined with the rise of digitisation and technical savviness of the younger generation makes the technology of bitcoin very useful for us.
The cryptocurrency industry is thus here to stay and it is essential to facilitate its advance, especially in the economic downturn brought about by the pandemic. The RBI, along with SEBI and the government of India, should consider exercising its regulatory powers and come up with a new, calibrated framework or regulation that acknowledges the reality of these technological advancements. We must take this opportunity to keep India on the front foot with other leading global economies and assure investors and stakeholders of the continuity in the business.
Here are a few things that the Union Budget should consider in granting greater regulatory clarity to cryptocurrencies in India:
1. Regulate the flow of money.
2. Options of raising capital.
3. Provisions and amendments in IT and GST laws for clarity on applicability of taxes. 4. Recognition of specific acts as offences liable to penalties so users and platforms can better understand their rights and duties.
5. Recognition of cryptocurrencies as tradable commodities.
6. Employment of blockchain technology for government records.
While it may not be possible to bring out all these rules at once, some kind of road map would be necessary. This would help the country on multiple levels, whether in investment opportunities, employment or innovation. If such a legislation is announced, India will join the ranks of the countries to bring a robust regulatory framework to crypto assets and will be able to compete with developed countries in this industry.