Stakeholders, including regulators, have made their representations to a panel of federal lawmakers and the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 is likely to become law soon.
“The journey of discovery that India is travelling in terms of regulating cryptocurrencies is one that most governments have to address and implement according to what is right for them at the time,” said Adam Mazzaferro, Founder, @pay, an Australian decentralised platform that operates the @pay token. “We believe that it is also important to consider how technology may benefit the general economy and the processes that drive many functions along the way. Over time, we take the view that these benefits and efficiencies will come through.”
There has been major confusion over crypto assets in India due to multiple messaging by different stakeholders: the central bank has red flagged risks from cryptocurrency to the financial system while North Block is seeking to ‘regulate’ the asset class in its new crypto bill instead of enforcing an outright ban.
The global Defi community at large is seeking clarity and a clear direction in regulations.
“India’s politicians have consistently sent out mixed messages, threatening to ban crypto currencies several times, perhaps over fears of enabling the black money markets or (triggering) capital flight. Now is the time to encourage innovation in one of the most innovative countries in the world and to attract high quality projects in the space to advance the technology as opposed to driving them underground or abroad to territories as close as Dubai,” said Toby Gilbert, CEO and Cofounder, Coinweb, which operates out of London, Kiev, and Bangkok.
Harishkarthik Gunalan, CEO of Singapore-based Coinfantasy, said that blockchain and crypto industry are by and large an interplay between technology and mathematics, two fields that Indians have been very good at conventionally, and hence it’s natural for Indians to get attracted toward it.
“This attractiveness has manifested itself in such a large number of people from India trading digital assets and also in the fact that, without any regulatory support, India has had two crypto-focused unicorns in the last 8 months. A supportive regulatory framework will only enable many more who are watching from the sidelines as this once-in-a-generation new asset class emerges, ” he said.
Global industry experts believe Indian regulators, while framing laws around crypto assets, should keep in mind that crypto currencies are an integral part of the entire blockchain ecosystem.
“India is one of the fastest growing economies in the world and is an important frontier for decentralised blockchain technology to penetrate. In turn, crypto currencies are an essential component, without which it becomes difficult to incentivise the decentralised component of the technology, and what you are left with is a centralised ledger, defeating the purpose of the object and severely limiting funding for innovation, ” said Gilbert.
Experts such as Dr. Julian Hosp, CEO and Co-Founder of Singapore-based Cake DeFi, say that completely banning cryptocurrencies is just not possible in the rapidly evolving Defi ecosystem.
“It is important to note that cryptocurrencies as a whole exist on the blockchain. There is no single entity controlling it; that is part of the decentralised nature of it. While the Indian government can implement a ban on trading crypto, the exchanges that facilitate those trades, or even the enablement of using cryptocurrencies as payment methods, a blanket ban on cryptocurrencies just isn’t possible,” said Hosp. “On top of that, you have decentralised exchanges (DEX), such as that of DeFiChain’s DEX, which wouldn’t come under the purview of any government or singular entity as they are run by distributed communities of developers and enthusiasts.”
Regulators across countries and the crypto industry across the world are eagerly waiting for the crypto bill to lay down rules for digital coins, tokens, and virtual currencies even as most other governments too are struggling to formulate crypto regulations.
In the US, Maxine Waters, the chair of the House Committee on Financial Services, recently met with several CEOs of major crypto firms to discuss digital assets and the future of finance. In South Korea, lawmakers postponed a 20% crypto tax until 2023, citing flaws in gathering tax information.
In Russia, cryptocurrencies and some related activities have been partially regulated, but many important areas like crypto mining, taxation, and use of digital coins for payment and crypto trading have been left out, leading to regulatory confusion. Germany brought in a regulatory regime for crypto assets last year but still has to reform the related civil law regime. A licencing framework for crypto issuers and service providers is also still in the works.
