Love it or hate it, but you can’t ignore it. Yes, we are talking about cryptocurrency. Those who like cryptocurrencies are showing a lot of interest in crypto investment. But, those who hate to invest in cryptos, are also talking about it. That is the kind of popularity Cryptocurrency platforms have achieved. These platforms have grown exponentially in the last few years.
Globally, more than 200 million investors have shown interest in the crypto exchange. If we talk about India, the crypto industry has shown immense growth in the last year and has recorded a total of 15 million user base. And, these numbers are growing rapidly.
But, the Indian crypto environment is also facing new challenges every day. Without proper regulations, it has become very difficult to invest in cryptocurrencies from India. Earlier, RBI banned crypto transactions. Later, the Supreme Court of India lifted the ban from cryptocurrency transactions. And, there is the Indian Government that is drafting a bill to ban all virtual currencies in India.
Let’s talk about these major events that are making cryptocurrency future uncertain in India.
Legal Issues Against Crypto Exchange in India
It was 2018 when the Reserve Bank of India(RBI) decided to ban all transactions related to cryptos. This decision affected the crypto startups very badly. They all came together to fight against the monopoly of RBI. The fight was intense and difficult for blockchain startups due to their beginning in the Indian startup ecosystem.
But they did not lose hope. And finally, on March 4, 2020, the Supreme Court of India gave a judgment in favor of crypto stakeholders. And the order legalized crypto investment in India.
Well, it was a short-term celebration for crypto lovers. In January 2021, the Indian government announced that it brings a bill to ban all cryptos in India. And authorities also revealed that they may think about launching Indian digital currency.
As soon as the information about the draft bill against cryptocurrencies hit the public domain, it brought bitcoin value down by approximately 5%. Bitcoin is the most popular cryptocurrency in the world.
Slowly, investors forgot about the Indian bill and crypto investment again surged in India. Crypto exchange platforms like Coin Switch Kuber, WazirX, and CoinDCX, and others met the government officials to reconsider the crypto ban in India.
Their efforts brought some good news for the crypto stakeholders. Finance Ministry revealed that we are open for discussion and will consider investors’ points of view with open minds.
Here comes the U-turn again in the crypto market. Now, most banks are not allowing crypto transactions on their platforms. But Why?
Why Indian Banks are Against Supreme Court Order?
In a recent development, major banks including HDFC Bank, ICICI Bank, Axis Bank, Yes Bank, and RBL Bank, among many others have halted crypto transactions on their respective platforms.
In a discussion with Inc42, related to Indian banks decision against crypto, Sathvik Vishwanath, the founder and CEO of Unocoin, a Bengaluru-based crypto exchange said:
“HDFC Bank has not been extending its banking solutions to crypto startups for the last year. And the latest in this list is ICICI Bank that has now pulled the plug. As a result, payment gateways failed to complete transactions linked to ICICI Bank, and it created some disturbance.”
Logically, a private bank can’t go against the Supreme Court order without the support of RBI. Crypto startups have won a case in Supreme Court against RBI and they have also convinced the ministry not to go ahead with the crypto draft bill. But it is RBI that will take major decisions related to transactions and the Indian economy.
So, it was RBI who informally told HDFC and now ICICI not to process crypto transactions.
One of the HDFC employees that asked to keep his identity anonymous said:
“We are merely following the RBI guidelines given to us. Until and unless the regulator changes its stance towards crypto, our hands are tied.”
Why RBI is Against Crypto?
Now, the next major question is: why RBI is against the Supreme Court order? Answering this question, an RBI Officer without revealing his identity, said:
“These are currently not regulated in India. As a result, the RBI is bound to take measures to stop large conversions of INR into cryptos.”
He further added:
“The prices of bitcoin and other cryptocurrencies are highly volatile and extremely speculative in nature. At a time when the country’s economy is passing through a rough phase (mostly due to the ongoing pandemic and the recession), the RBI cannot afford to fight on multiple fronts.”
Nirmala Sitharaman, Finance Minister of India, also informed in Parliament on March 5, 2021, that the ministry is in discussion with RBI to reach a common understanding.
In an interview with CNBC-TV18, She said:
“We want to make sure there is a window available for all kinds of experiments, which will have to take place in the crypto world. It is not as if we are going to look inwards and say we are not going to have any of this. There will be a very calibrated position.”
Meanwhile, startup firms, including IndiaTech.org, IAMAI, Blockchain and Crypto Assets Council (BACC), and others, are constantly communicating with finance ministry officials on how to bring in more clarity, transparency, and accountability in the Indian crypto industry.
Nischal Shetty, the founder, and CEO of WazirX said:
“The Indian crypto industry is eager to help the government formulate the right regulations so that India can stay competitive with the rest of the world.”
Things are quite uncertain in India related to crypto investment. But Indian crypto investors are still trading in cryptos. As per the latest report, Indian users has more than $1.5 billion crypto assets and they do daily transaction of $350-500 million crypto value.
Blockchain-based startups have also grown from 100+ in 2018 to 300+ in 2021. These startups have also received fundings from crypto investors but that is just 0.2% of the global investment in cryptocurrency firms.