India's share in the global market for cryptocurrencies is growing rapidly. Close to 200,000 users are being added each month and a recent report had suggested that over $3.5-billion worth of transactions were conducted over the past 17 months. However, the government may have just signalled an end to the party.
In his budget speech on Thursday, Finance Minister Arun Jaitley reiterated the government's earlier stand that it was not a legal tender in India and went a step ahead in stating steps would be taken to eliminate it.
“The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system,” he said in the budget speech.
However, there was no word on the status of the several cryptocurrency exchanges that have set up shop in the country and whether the government would also ban trading in cryptocurrencies. Therefore, some cryptocurrency players feel nothing much changes on the ground.
“The government has not changed its stance on the trade of cryptocurrencies in India. I believe that the government is taking its time to understand the crypto world and will come out with suitable steps to regulate the same this year. India's global share on cryptocurrency market is steadily increasing and government intervention can only help regulate this entire industry,” said Praveenkumar Vijaykumar, CEO of Belfrics Global.
Malaysia-based Belfrics had launched its bitcoin exchange in India last year and Vijaykumar had told THE WEEK recently that it has stopped taking any fresh deposits from India, in the wake of the regulatory uncertainty.
Legal experts say that the government may soon bring in a legislation on cryptocurrencies to ban cryptocurrencies.
“This (budget speech) clearly indicates that the government will now either come out with a legislative mechanism or make suitable amendment in existing legislation to ensure that dealing and trading in cryptocurrency is made illegal and to penalise entities and individuals who are involved in trading and circulation of cryptocurrency,” said Monish Panda, founder of law firm Monish Panda & Associates.
The Department of Economic Affairs had last year set up a committee in relation to virtual currencies. The government is reportedly studying the report that the committee has submitted.
Even as the government has toughened its stand against cryptocurrencies, it seems keen on the underlying blockchain technology.
Blockchain is the foundation for cryptocurrencies. But, that is not its only use. Many banks and financial institutions, for instance, have now started adopting blockchain technology, which the government too wants to embrace.
“Distributed ledger system or the blockchain technology allows organisation of any chain of records or transactions without the need of intermediaries. The government will explore use of blockchain technology proactively for ushering in digital economy,” Jaitley said in the budget.
Experts have welcome the government's stand on blockchain.
“The point raised by the finance minister about exploring the usage of blockchain technology for payments is a very good initiative. It will support homegrown technologies who have already invested in the technology and will attract new investments in this technology,” said K.K. Mookhey, founder of Network Intelligence, a global cybersecurity firm.
