The Current State of Cryptocurrency in India
To say that the cryptocurrency market has had a hot and cold welcome into most countries is, to say the least. Governments ran helter-skelter behind the market for three main reasons; loss of control, loss of importance for traditional currency and economy and lack of understanding. While some countries lapped it up immediately, others banned it in a heartbeat while a few countries in between danced the line between legal and illegal.
Most of the countries that were unsure about the cryptocurrency market were developing ones or the ones that had already developed. The developing ones because it would essentially mean undermining all their efforts so far and developed ones because they would have to reorganise their entire economies to facilitate and accommodate the new disruptive technology.
In this particular article, however, we will discuss the state of the cryptocurrency market and the blockchain industry in India. We will discuss how the cryptocurrency market entered, its background with and specific to the country and what accommodating the market could mean for their economies.
India And The Cryptocurrency Market; A Background
The cryptocurrency market in India took its own sweet time to spawn its own full-fledged community. In the country, the market was not a prevalent point of discussion until late 2013 when Bitcoin experienced its first bull. Of course, this is not a fair representation of the smaller groups that entered the cryptocurrency market way earlier.
One of the major reasons that the market took its own sweet time is because at the time there was a lot of false representation of the cryptocurrency market in the media. At that point, the first cryptocurrency of the world; Bitcoin was synonymous with the dark web’s notoriously infamous market the Silk Road. As one of the preferred currencies for services and goods on Silk Road was Bitcoin because of the anonymity that it presented its users.
So from the very beginning of its existence, the Bitcoin has been associated with illegal activity and at a time that Silk Road was an eminent dark web market, not many people wanted to risk being associated with it.
Another contributing factor for the slow pick up of Bitcoin in India was the resistance that the government and regulatory bodies showed for its adoption. The Indian government issued warning after warning telling its citizens of the dangers of being involved in the cryptocurrency market and discouraging any step taken toward it. One of the major reasons for the resistance that the government showed at that point was because, for all intents and purposes, the government was divided on its stance on the market.
While most believed that it was nothing but a bubble that will burst under the pressure of speculation, others believed that the cryptocurrency market and the blockchain technology is the break the country had been waiting for. Because of the lack of consensus, the government and its regulatory bodies sent out many warnings and announcements that sent out mixed signals to the people.
A couple of years on, the RBI Governor at the time, Raghuram Rajan, commissioned a research team in the RBI’s research arm to explore blockchain’s capabilities and how it could help better the existing financial system. And a couple of years after that the cryptocurrency market and the blockchain industry became a moot point of discussion in the parliament.
But by that time, the cryptocurrency market was already booming in the country and it was estimated that over Rs 500 crore were put into the market per year, with almost 50,000 Bitcoin wallets and over 800 Bitcoins being operated on a daily basis. The only thing was that these operations were carrying on unregulated because the government was still undecided.
The Blanket Ban Issued By the RBI
At one point, after the cryptocurrency market picked up in the country, almost all banks were lending support for INR-Crypto and Crypto-INR pairs on almost all exchanges functioning in the country. There were exchanges that had direct links to the banks, making it easier and easier for people in the country to get into the market. It had become very easy to hold, trade and convert cryptocurrencies to and from the Indian Rupee. And it was taken for granted that nothing about that would change.
But on the 6th of April, 2018, a decree was issued by the RBI giving all banks, businesses and enterprises a deadline of three months to drawback support for the cryptocurrency market. And anyone in violation of the decree would no longer be a registered enterprise with the RBI. This sent shocks through the market and everyone took it as a sign of the government banning the market in the country. There were mass sell-offs and many exchanges had pulled out of the Indian market and/or moved headquarters overseas.
Amdist this, a lot of exchanges and community members were determined to fight the decree. And raised a petition on public interest in various courts across the nation against the decree released by RBI, saying it was violating the protected constitutional right to an equal trade opportunity. The case was going ahead full-steam with the CGI overlooking procedure, however, the court postponed the verdict date twice and the next one set is in the second week of January 2019.
In light of the stall tactic employed by the government in chair and the judiciary, the people filed for a stay order on the enforcement of the decree. The stay order request, however, was denied almost immediately after filing. And after the deadline lapsed, banks withdrew support, making it a lot harder for the community in India.
Though there are some loopholes that are still being exploited by the community in India, the average member of the cryptocurrency community, who didn’t sell, is struggling to hold and trade their cryptocurrency assets.
There is some hope because a couple of months ago, the government came out and said that the announcement and decree were a little premature and that they would strive to figure out ways to integrate the technology into the country’s existing financial setup. There were even rumours of the country having set up a task force for the same. But nothing is for sure until it is on black and white.
Why The Indian Economy Can Benefit From Regulation
India is a developing country. All said and done, the economy can use multiple boosts and will benefit largely from the market being regulated. The cryptocurrency market runs atop one of the most advanced albeit disruptive technology of the 21st Century.
Most people believe that this technology is the future of the global financial market and to be very real, it very well could be. The technology has matured enough for the same and blocking it out at this point is not the best way forward. While there is a chance that the blockchain isn’t the way forward, the scales are too tipped to the market’s favour to ignore it at this point.
With a few changes here and there, the Indian financial market can easily integrate the blockchain into its day-to-day. With that being said, there was a lot of talk about the RBI making its own digital currency called the Lakshmi Coin, under Raghuram Rajan’s governorship. But that project, post-decree, seems to have been scrapped.
Another major advantage India, as an economy can enjoy is from the blockchain industry. The blockchain industry is the new in thing in the tech industry. By legalising or regulating the cryptocurrency market in the country, they can benefit off the booming startup industry that surrounds the cryptocurrency market. Along with the cryptocurrency market, the Indian economy is also losing out on the exchange business that the cryptocurrency market can attract to the country.
A lot of companies have already identified the pros and cons of blockchain technology and have started to implement them and further their capabilities. The names that are currently experimenting with blockchain include; IBM and Infosys.
The future of the cryptocurrency market and the blockchain industry are bright and profitable for any government/country that gets behind it. But having said that, the Indian economy is on a two-edged sword at this point. Legalising the cryptocurrency market would be admitting that they were wrong all along and not doing so would be short of shooting themselves in the feet.
What India decides to do will determine whether or not the country will get ahead of the blockchain revolution or behind. Either way, it is going to be a wait until either becomes clear for the Indian community.
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Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.