Indian Cryptocurrency Enthusiasts Call New Delhi Bluff On Ban | Coronavirus pandemic

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New Delhi, India – Saurabh Shah, a 26-year-old chartered accountant in Mumbai, isn’t too worried about India’s latest plans to ban cryptocurrencies. He has seen similar proposals come and go before.

As a student, Shah invested in Bitcoin in 2017, just before India’s central bank banned financial institutions from executing crypto-related transactions.

“I invested in it by following the buzz surrounding it,” Shah told Al Jazeera, admitting he had no idea how cryptocurrencies worked at the time.

“When the announcement of the Reserve Bank of India ban hit the media in April 2018, it scared me, but I couldn’t withdraw my money. I’m glad I never did, because the Supreme Court lifted the ban later. I made fabulous gains on my initial investment.

Even after the government announced a bill to ban cryptocurrencies last month, Shah doesn’t think an outright ban will ever happen.

“Even if I did, I only invested the amount that I can afford to lose,” Shah said.

The ruling Bharatiya Janata Party (BJP) bill would ban all private cryptocurrencies and introduce a digital currency issued and regulated by the central bank, with “certain exceptions” allowing private currencies to “promote the underlying technology. of cryptocurrency and its uses ”. On Tuesday, Finance Minister Nirmala Sitharaman said the bill was being reworked to account for rapid changes in the industry, without providing details on changes to the original draft.

Vidur Chhabra, a full-time crypto investor in Goa, said he doubts a ban will last as the genie is out of the bottle.

“The government and central bankers are at least 10 years behind. Even if they ban it, they will have to revoke it the way the South Korean government is now considering it, ”Chhabra said, referring to recent signs that Seoul may relax its ban on raising funds through virtual currencies. .

“I am hopeful. In a world where currencies are constantly degrading, investing in crypto is an obvious hedge.”

New Delhi proposed the creation of a new digital currency issued and regulated by the Reserve Bank of India [File: Francis Mascarenhas/Reuters]

The market seems to share its optimistic outlook. While Bitcoin and other currencies fell 20% last week after the bill was announced, prices stabilized within 24 hours.

“People like us who understand the crypto space bought most of the time, during the recent downfall,” Aishwary Gupta, strategist at Polygon Technology, told Al Jazeera CA, a scaling solution for blockchain. Ethereum. “The same people who sold suffered losses as the market recovered shortly thereafter.”

India is believed to have one of the largest crypto markets in the world, with tech industry body Nasscom estimating the country to be home to around 15 million crypto investors.

Driven by investors seeking yield in an era of low interest rates, the crypto rush has led to a proliferation of start-ups and exchanges.

In newspapers and on television, crypto ads promising wild returns are everywhere. Bollywood stars such as Amitabh Bacchan, Salman Khan, Ayushmann Khurrana and Ranveer Singh have endorsed particular currencies. With mostly foreign venture capitalists investing huge sums in different cryptos and pushing prices up before selling to the top, some retail investors have inevitably been burnt out.

Stories of big losses and the misuse of cryptocurrencies for money laundering and “terrorism” have sparked calls for greater scrutiny of the nascent industry. In November, Prime Minister Narendra Modi warned of the risk of cryptocurrencies ending up in “the wrong hands”. He warned that emerging technologies could potentially be used as instruments of conflict and domination.

“I doubt there is a permanent ban, but a temporary ban is expected,” Sushil Kedia, founder of financial market research firm Kedianomics, told Al Jazeera. “Pulling the plug for a while will reduce activity in the crypto market while the government fine-tunes regulations. “

Meanwhile, crypto exchanges are clamoring to prove they can self-regulate. “Many crypto exchanges make KYC [know your customer due diligence] of every investor on their platforms, ”Avinash Shekhar, co-CEO of crypto exchange app Zebpay, told Al Jazeera. “As an industry, we have also taken note of irresponsible advertising. The number of crypto ads has dropped significantly over the past two weeks.

Crypto literacy

Gupta said regardless of government oversight or industry self-regulation efforts, investors need to educate themselves about the market.

“I urge investors to educate themselves before investing,” he said. “They should understand the dynamics of demand and supply, use cases and the credibility of the people who run crypto projects.”

Nevertheless, the industry is preparing for more stringent regulations.

Some analysts believe that while the government is unlikely to accept the use of cryptos as private currencies, authorities can accept their use as financial assets.

“Cryptos should be classified as an asset class investment in India,” Ashish Singhal, co-chair of the Blockchain and Crypto Assets Council (BACC) told Al Jazeera. “It’s regulated the same way in many other countries, and almost every crypto use case is an investment, not a payment. In addition, the Indian crypto industry needs a suitable framework for the movement of funds, a rigorous KYC [Know Your Customer] procedure and an appropriate reporting structure.

In November, Indian securities regulators authorized Invesco Mutual Fund to launch the InvescoCoinShares Global Blockchain ETF fund of funds. The ETF was scheduled to launch on November 22 before Invesco postponed it due to the crypto bill. The fund is said to have been India’s first program to provide exposure to global companies participating in the blockchain ecosystem. Meanwhile, India’s first cryptocurrency unicorn, CoinDCX, plans to launch an Initial Public Offering (IPO) once it receives regulatory approval.

Chhabra, the crypto investor, said the rise of crypto was unstoppable.

“The best technologies will continue to improve whether the government likes it or not,” he said. “I see cryptos as water. You can block it, but it will find its own way.

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