Stakeholders in India’s cryptocurrency ecosystem say there is a marked difference in their sentiments prior to 29 January and since 25 March – the start and end dates of the Budget session of the Parliament.
While fear of an impending ban on cryptocurrency trading and possession loomed large over the stakeholder community, it turned into relief and jubilation once the session ended without the Bill being introduced despite being listed.
Investors say, they see the delay in the Bill’s introduction as a positive signal because it means the government is taking its time to study the subject further rather than banning it outright, as provided in the 2019 draft of the Bill .
The fact that the government has not banned it is a huge positive in itself, stakeholders told The Quint.
“The unequivocal answer is they are celebrating it,” said Ajeet Khurana, former CEO Zebpay and angel investor, explaining that despite no actual legislation having been moved to regulate cryptocurrencies, there has already been action by the government towards regulation rather than a ban.
India today has over 75 lakh cryptocurrency investors who’ve collectively poured in over Rs 10,000 crore. The prices of cryptocurrencies, especially Bitcoin, has been soaring. Currently, the value of 1 Bitcoin stands at Rs 43 lakh as of 1 April.
In what stakeholders interpret as a distinct change in language, Union Finance Minister Nirmala Sitharaman now has indicated that the government may take a “calibrated approach” and leave a window open for experiments in cryptocurrency and blockchain technology.
Khurana also described MoS Anurag Thakur’s comments in the Lok Sabha as “a meeting of minds” – between lawmakers and other stakeholders.
The Quint spoke with stakeholders to find out where exactly the regulatory landscape stands currently. Experts say, while everything is still not rosy, the government’s tacit acknowledgement of cryptocurrency regulation, self regulation within the industry and the change in the government’s tone and language towards digital currencies are all positive developments.
Govt Not Banning Crypto a Big Positive: Stakeholders
Stakeholders said that a matter that is placed on the agenda of the Lok Sabha and doesn’t even get discussed is significant. “On the one hand, it is very easy for an unthinking knee jerk reaction which says, ‘just ban it’. They have not done that, which, I think, is extremely significant,” Khurana told The Quint.
The fact that the Bill has not been introduced nor has trading in cryptocurrency been banned has brought cheer to the ecosystem.
“I am actually very heartened by the delay in the government’s reaction because over the last six months significant developments have taken place globally,” Khurana added.
Stakeholders also point out that the community not objecting to any statements made by Anurag Thakur in the Lok Sabha during the Budget session as a major step in the right direction. “Unlike the other statements of the government in the past, which would cause a furore, the statements made this time have been accurate. So, that shows some sort of meeting of minds,” Khurana said.
Industry Welcomes First Step Towards Regulation
The Blockchain and Crypto Assets Council (BACC) of the Internet and Mobile Association of India (IAMAI) welcomed the government’s move on 26 March, making it mandatory for companies to disclose investments made in cryptocurrencies.
Sohail Merchant, CEO, PocketBits, a member of IAMAI’s Blockchain and Crypto Assets Council said the move opens the door for all Indian companies to have Crypto on their balance sheets.
“It is a good sign that India is moving towards more acceptance and awareness amongst the mainstream markets and regulators. This would help in shaping the crypto-assets market, eventually leading to its growth. It is in a positive direction and would bring transparency, legitimacy, and structure to the industry,” Merchant said.
Explaining why this is significant, Merchant said, “We started the company in 2015, we had applied to the Union Ministry of Corporate Affairs mentioning Bitcoin trading, but we were rejected multiple times because the MCA was not aware of bitcoins or cryptocurrency. It took us a few months just to get a private company approved.”
“Now a company can include bitcoins as an asset in the balance sheet and meaningfully disclose it. If you compare that to now there has been a huge change,” he added.
Another member of the BACC, Sumit Gupta, CEO and Co-founder, CoinDCX, opined, “This move will bring in a lot of transparency and will act as a comfort for Indian companies which are dealing in crypto-assets and were previously confused on how to put it in their books.”
“By providing companies with a clear avenue to disclose their holdings, the MCA has greatly helped law-abiding companies move forward with confidence,” Gupta added.
From Avoidance to Acknowledgement of Crypto Regulation
In the past, the Reserve Bank of India (RBI) and the Security and Exchange Board of India’s (SEBI) actions have indicated their attempts to stay away from anything related to cryptocurrencies.
“For example, in the Ponzi scheme bill of 2018, the RBI specifically said cryptography is not included in this. Primarily, they did not want to be seen as regulating cryptocurrency. Same with financial sandbox. In the past, they have made it a point to say they are not doing anything with cryptocurrency lest it give sanctity to it,” Khurana explained.
There appears to be a clear change in this hands-off stance.
But with the Union Ministry of Corporate Affairs asking companies about their cryptocurrency holdings and with SEBI now telling promoters they cannot hold cryptocurrency before an IPO are all being interpreted as some sort of regulatory action being initiated.
“At the very least what is happening is that regulatory action is now coming in the crypto space. I don’t see it as a restriction, instead I (it) see as an acceptance of a reality,” Khurana told The Quint.
Self Regulation Underway: Crypto Exchanges’ Code of Conduct
In February, the cryptocurrency industry finalised its draft ‘Code of Conduct’ for blockchain and crypto-firms in India. The code mandates all players to maintain transaction and customer data for seven years, in addition to norms on Know-Your-Customer, insider investments, external audits, and various customer protection measures.
“For the last 2-3 years, we have already been following the KYC norms. When we started the exchanges, there were no laws in place mandating KYC. Nonetheless, since day one, all exchanges have been performing KYC,” Merchant told The Quint.
“We came together and drafted a code of conduct to ensure there are no regulatory uncertainties in that case. We are following most of the norms that are in place for financial institutions,” he further said.
Gupta adds that at CoinDCX, they have already “implemented enhanced KYC requirements for institutions, and we gather important details around registration details, ultimate beneficial owners, etc, which helps resolve issues relating to AML among others.[sic.]”
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