As China imposed a blanket ban on cryptocurrencies, investors around the world turned panicky. Do investors in India have any reason to worry? Let us find out
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As Chinese authorities banned trading in cryptocurrencies, there was an immediate palpable fallout with global digital currencies declining everywhere including in India.
The People's Bank of China (PBOC) announced recently that cryptocurrencies cannot circulate in China and also barred overseas exchanges from giving their services to investors. It also restricted financial institutions, internet firms and payment companies from facilitating trading of digital currencies across the nation.
As a result, trading volume declined by 30 percent In India. The prices of top digital currencies such as bitcoin declined by over 9 percent, before recouping the losses.
In the Indian digital currency market, however, a number of restrictions have been imposed from time to time, but as of now, there is nothing to worry since the crypto currencies are decentralised, and insulated from the diktats of central banks.
“China cracking down on crypto is nothing new. But the fact that crypto is truly decentralised protects it from such geopolitical events. While there may be a minor bump but the markets will recover soon as it has done in the past, said Sharan Nair, chief business officer, Coinswitch Kuber
Government’s stance on cryptocurrency trading
The Government of India made an inter-ministerial committee in November 2017 to examine the future of virtual currencies. The report — submitted in July 2019 — lauded the blockchain technology and also made suggestions to use its applications in various sectors such as banking for numerous processes including collateral management, loan-issuance tracking and fraud detection among others.
As of now, there is no crackdown by the Government of India, but the RBI had issued a crackdown in April 2018. During that time, an RBI circular told the banks not to deal in virtual currencies or to facilitate any services to crypto traders.
The same year, the then Union Finance Minister Arun Jaitley announced that “bitcoin is not a legal tender" in India.
In March 2020, the Supreme Court lifted the RBI’s restrictions and made its order void, permitting banks to transact in cryptocurrencies.
The biggest impetus for digital currencies in India came in March 2021 when the Ministry of Corporate Affairs mandated the companies to disclose the investments and trading in cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, among others. The disclosure was, seemingly, intended to curb illegal activities that take place through digital currencies.
So, although bans on crypto currencies by Chinese authorities or similar actions do not put any stumbling blocks for digital currency traders in India, they — on the other hand — give good buying opportunities to investors.
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