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Amid growing cryptocurrency euphoria in India, there have been some fast-paced developments on the way forward for digital currencies with RBI governor Shaktikanta Das kicking it off by sounding caution on cryptos.

Cryptocurrencies are a very serious concern from a macro economic and financial stability point of view, Das said a few days ago, while reiterating his stand once again recently, saying, "There are "far deeper issues" involved in virtual currencies that could pose a threat to India’s economic and financial stability."

On the other hand, Prime Minister Narendra Modi chaired a high level comprehensive meeting recently, where he expressed concerns about unregulated crypto markets becoming avenues for money laundering and terror financing.

There was also consensus, during the PM's meet on how to stop advertisements that over-promise and mislead the young investors.

The Parliamentary Standing Committee for Finance has met various stakeholders and experts, a first for the panel on cryptocurrency and related issues. The panel stressed on regulation of cryptos but not completely shutting the door on them.

The members of the Parliamentary panel are said to have wished for govt officials to appear before it and address their concerns. There was a consensus that a regulatory mechanism should be put in place to regulate cryptocurrency. Industry associations and stakeholders were not clear as to who should be the regulator

The Members of Parliament (MPs) have expressed concerns over security of investors’ money.

Amid all these developments, there are reports that the government may bring cryptocurrency Bill in the Winter Session of Parliament. The proposed bill would focus on investor protection as crypto currencies come under a complex asset class category.

In the meanwhile, let's look at what India may allow and may not allow when it comes to cryptos.

For starters, India has had a hot-and-cold relationship with digital currencies in the past few years. In 2018, it effectively banned crypto transactions after a string of frauds following Modi’s sudden decision to eliminate 80% of the nation’s currencies, but the Supreme Court struck down the restriction in March 2020.

After Supreme Court overturned the RBI’s order, which effectively lifted the ban on cryptocurrency trading in India, the craze in the country has grown at a furious rate.

Following this in February 5, 2021, the central bank had instituted an internal panel to suggest a model of central bank's digital currency.

An inter-ministerial panel on cryptocurrency under the Chairmanship of Secretary (Economic Affairs) had recommended that all currencies except those issued by the state should be banned.

The Reserve Bank of India (RBI) has repeatedly reiterated its strong views against cryptocurrencies saying they pose serious threats to the macroeconomic and financial stability of the country and also doubted the number of investors trading on them as well their claimed market value.

Currently, there are no particular regulations or any ban on use of crypto currencies in the country. The union government has not yet enacted a law on cryptos, but is in consultation with industry experts, comments from various officials and ministers.

After several rounds of caution, the government might largely want to set some limits for cryptos in India in the larger public interest. However, from the recent PM meeting, the overall view within government is that steps taken would be proactive, "progressive and forward-looking" as cryptos represented an evolving technology.

The crypto community has made several representations to Indian authorities asking to be classified as an asset rather than as a currency, in order to gain acceptance and avoid a ban.

A possibility that is being explored in the government is that cryptocurrencies may be barred for the use of transactions or making payments, but allow them to be held as assets like gold, shares or bonds, an Economic Times report said.

The Securities and Exchange Board of India (Sebi) could be designated as the regulator, though that has not been finalised, according to the same report.

India's digital currency market was worth $6.6 billion in May 2021, compared with $923 million in April 2020, according to blockchain data platform Chainalysis.

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