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Cryptocurrency exchange Unocoin was launched in 2013, making it accessible for Indians to buy and sell Bitcoins.The same year witnessed a rise in the price of Bitcoin from USD 100 to USD 1000.Lately, cryptocurrency has been in the news following wild price swings and with a pandemic-induced boom in trading meant several newcomers have started dabbling in this asset class.
However, the sword of regulatory uncertainty hangs heavy on the cryptocurrency market in India with policymakers making their discomfort with the asset, quite clear through various suggestions and decisions in the past.The overall crypto-market remains extremely volatile at the moment.
The recent uncertainty in the crypto-market has been triggered by a barrage of unpleasant announcements ranging from Elon Musk’s tweet to China crackdown and tight regulations and investigations against crypto trading platforms like Binance.
Investment Rise
Singapore-headquartered crypto platform Vauld is looking to expand its international presence by ramping up hiring and licensing to continue offering crypto banking and investments on its platform.The company announced raising USD 25 million (Rs 186 crore approximately) in a Series A round of funding led by Peter Thiel-backed early-stage technology venture capital firm, Valar Ventures.
Founded in 2018 by Darshan Bathija and Sanju Sony Kurian, Vauld currently counts Binance and BitGo as exchange and custody partners.Another crypto firm CRED raised USD 215 million in a Series D in April that valued the Indian startup at USD 2.2 billion (post-money), up from about USD 800 million valuations in the USD 81 million Series C round in January this year.
Cryptocurrency prices continue to be in the green as on August 8th 2021.The global cryptocurrency market cap is $1.85 trillion, a 5.24 per cent increase over the last day while the total crypto market volume over the last 24 hours is $123.413 billion, which makes a 17.28 per cent increase.
Ethereum’s London hard fork went off without a hitch this week, and investors are now looking for fresh highs above $3,100.After Bitcoin’s price soared above $44,000, the bullish momentum continued, and Ether is currently trading at $3,050.
Regulatory Halts
Digital currency is the way of the future but the complete shift is not only unlikely but also quite concerning considering the turbulent status of cryptocurrencies.
While the number of private cryptocurrency exchanges operating in India is growing, the Union Government has no official data on them or the number of investors linked to these exchanges.
In reply to a query on the number of cryptocurrency exchanges operational in India and the number of investors linked to them, Union Minister of Finance Nirmala Sitharaman in a written reply tabled in Rajya Sabha on July 27th, 2021 said, “This information is not collected by the Government”.In response to another query on “whether it is a fact that narcotic drug traffickings and money laundering are being committed through many of the cryptocurrency exchanges”, FM Sitharaman stated, “No such information has come to the notice of the Government.”
The Finance Minister also denied that the Government was planning to impose an equalisation levy on the number of investors who have bought cryptocurrency from abroad.In the meantime, the European Commission’s proposed Regulation on Markets in Crypto Assets (MiCA) is going through its first readings in the Council and the European Parliament.This regulation will form part of the EU’s Digital Finance Strategy and is likely to significantly impact the operation of the crypto market in the EU.
The RBI’s Move
The Government is expected to be working on a cryptocurrency bill and the RBI (Reserve Bank of India) is also planning to introduce Central Bank Digital Currency (CBDC) in a phase-wise manner to curb the damaging consequences of private virtual currencies.The RBI Deputy Governor T.Rabi Sankar recently said that the central bank was “working towards a phased implementation strategy and examining use cases which could be implemented with little or no disruption”.
The RBI is currently examining the scope of CBDCs, the underlying technology, the validation mechanism, distribution architecture, and degree of anonymity, etc.
The cryptocurrency space in India has been witnessing a revolution for the past couple of years.Despite the ambiguity in regulations and extreme volatility, millions of Indians prefer investing in cryptocurrencies instead of gold.
Based on the sudden increase in the consumer base, the Indian government is now considering an introduction of a new bill that is similar in spirit to its previous versions, however, intends to ban private cryptocurrencies in India with certain exceptions to promote the underlying technology and trading of cryptocurrency.And thus provide a framework for creating an official digital currency that will be issued by the RBI.
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