(Illustration: Sudhir Shetty)
(Illustration: Sudhir Shetty)

Opinion | Cryptocurrency: The scene in India

Indian entrepreneurs are moving their base to the cryptofriendly countries to experiment their innovations

The wait-and-watch approach from the government and the central bank is turning out to be costly for crypto investors. Countries such as Malaysia, Philippines and Bahrain have adopted cryptocurrencies and have formalised license for market operators. Even the guidelines released for the issuance of the Security Token Offering (STO) have been legalised in these regions. Meanwhile, Indian entrepreneurs are moving their base to the cryptofriendly countries to experiment their innovations.

The approach that we accept blockchain but not cryptocurrency might sound a better bet to lure the blockchain entrepreneurs, but a majority of global talents are extensively experimenting on the public blockchain or permission blockchain. Indian innovators have a limited window of experimenting only with private blockchain. By limiting their services and product to the private blockchain, they are not able to compete with the global startups that have the flexibility to take the innovation directly to the end user. Hence, there is a shift of blockchain talents and businesses from India to overseas regulated regions.

For the crypto investors, the situation is even worse. Since the Reserve Bank of India (RBI) directives to the financial institutions to not to provide services to the crypto exchanges, almost all of the major rupee versus crypto exchange service providers have shut down their operations. The transactions have moved to a peer-topeer market where exchanges happen through escrow services and through social media groups. From money laundering to terror financing, the risks associated with cryptocurrencies are the major concerns of the government and the RBI, but if the hacking of major exchanges are taken apart, still the existing cash currency dominates the money laundering and terror financing market as compared to cryptocurrencies. Apart from this the Indian government is also concerned that if bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilising the fiat currency. Since there is a capital applicable for all India residents, the above concerns are valid to an extent but an innovative regulatory approach could have helped in finding out a better solution to regulate the multi-billion dollar cryptocurrency market. The government has also supported blockchain as a technology of the future but without the involvement of cryptocurrency, a peer-to-peer, fully transparent solution might be a distant reality.

The RBI, in April 2018, had directed banks to snap all ties with cryptocurrency exchanges in India. Since then, crypto enthusiasts have been kept in the dark as there has been no significant movement or clarity on the legality of these digital currencies. This indirect ban forced some major crypto exchanges to either shut down Indian operations completely or diversify to a peer-to-peer (P2P) model. The finance ministry along with RBI is currently in the final stages of drafting a regulatory framework for legalising crypto currencies in India. However, this has been a long 12 to 15-month wait. The committee, led by the top bureaucrat Subhash Chandra Garg, is believed to be in a tangle over the impact that digital coins will have on the Indian rupee.

Praveenkumar Vijayakumar is chief executive officer and founder, Belfrics Global

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