India’s tryst with legalising cryptocurrency

Digital currency has still not found formal acceptance in India even as several global players are exploring opportunities to enter the domestic market. Kraken, Bitfinex and KuCoin, an agency report says, are vying to make their debut in the subcontinent, following the footsteps of market leader Binance. In 2019, Binance had acquired WazirX, a domestic cryptocurrency start-up which has allowed users to buy and sell crypto with Indian rupees on the Binance Fiat Gateway. US-based exchange, Coinbase, too has announced plans for a back-office in India. All three exchanges, Kraken, Bitfinex and KuCoin, are ranked among the world’s top ten by data platform CoinMarketCap, based on traffic, liquidity and trustworthiness of reported trading volumes. “The Indian market is huge and it is only starting to grow. If there was more policy certainty by now Indian consumers would have been spoilt for choice in terms of exchanges because everyone wants to be here,” said Kumar Gaurav, founder of digital bank Cashaa. However, it is not going to be easy as the government is yet to spell out a clear strategy to legalise cryptocurrency.

On one hand, Finance Minister Nirmala Sitharaman has stated that a lot of work has been done, taking into account stakeholders’ inputs. A Cabinet note has also been prepared as the FM has gone on to say that it is only a matter of time so that a Bill for crypto can be introduced. This has to be seen in the context of industry analysts reckoning there are 15 million crypto investors in the country holding over Rs 100 billion ($1.37 billion). However, the Reserve Bank of India is dithering on its stance to give crypto a green signal. Interestingly, in February this year, RBI Governor Shaktikanta Das, had spoken about introducing its own digital currency. A few months later, the Apex Bank opted for a diametrically opposite narrative as it informally urged lenders to cut ties with cryptocurrency exchanges and traders. As the highly speculative market booms, the Supreme Court ruled that banks can work with players in the crypto industry.

Proponents of cryptocurrencies say they would be the most cost-efficient way for Indians abroad to remit funds home. But authorities worry that HNIs and criminals could conceal their wealth in the digital world, and speculative flows of funds through digital channels, ungoverned by India’s strict exchange controls, could destabilise the financial system. The government also has held back the cryptocurrency Bill for now. Meanwhile, it continues to be a wait and watch game as those keenly following the crypto space seek clarity to make their next move.