The government’s plan for a bill acting against private cryptocurrencies has reopened the debate on the fast-paced and highly volatile sector, where politics have so far failed to catch up with technology. The Sunday Express meets with a range of stakeholders – from investors to coin exchange players and government – on what might be the way forward.
Aditya Singh’s first serious foray into the cryptocurrency world came after a payment failure. The owner of a recruiting firm he runs with his brother, Singh says that in 2015 one of their European clients would not pay the commission and eventually stopped taking calls.
“When we finally contacted the customer, he offered to pay in Bitcoins. We had doubts but since there was no other way to get our commission, we accepted. That’s when we realized there was a whole market around Bitcoin and other cryptocurrencies, ”he says, refusing to reveal his investment or other personal details.
The more he digged, the more he was drawn to this decentralized financial system that was beyond the control of governments and banks. “I also watched a lot of cryptocurrency related videos, but they were mostly in English and realized that the Hindi discussion of fundamentals was lacking in India,” he says, adding that he quickly started. to post videos on YouTube.
The idea clicked. Aditya’s YouTube channel Crypto India currently has 1.97 lakh subscribers and he is regularly invited as an “expert” by news channels.
Singh’s story mirrors that of others across India, many from Tier 2 and Tier 3 cities, mostly ambitious young investors excited about the opportunities of this new financial frontier – from Kanha Mohanty, 24, an engineer in Jagatsinghpur, Odisha, whose cryptocurrency investments have earned him Rs 30,000 in the past year, to unemployed Pankaj Chowdhury, 26, of Howrah, West Bengal, whose mantra is “to invest only as much as you can afford to lose”.
In the absence of a regulatory framework or safety net, this interest in cryptocurrencies, mainly among new investors with little knowledge of the products or the risks involved, has caught the attention of policymakers. . The government has decided to introduce a bill in the winter session from Monday to ban “all private cryptocurrencies in India” with “certain exceptions”.
Currently, although India does not recognize cryptocurrencies as legal tender, there is no ban on trading in cryptocurrencies.
A volatile investment
While there is not much clarity on the makeup of the Cryptocurrency Bill and the Official Digital Currency Regulation, 2021, on November 24, the possibility of a ban on certain cryptos led to a panic sell, resulting in a correction of more than 20 percent across cryptocurrencies listed on Indian stock exchanges.
It is this volatility that marks cryptocurrencies. If stock prices are supported by a company’s earnings and growth, there is no such underlying factor for crypto prices, which are primarily driven by hype and demand.
Recently, investors lost millions of dollars as a new cryptocurrency inspired by Squid Game, the popular Netflix series, went on a roller coaster. Its value plunged to near zero, but within days it was trading at $ 38 a token on an exchange called Pancakeswap. After a few days, the token’s value dropped from $ 628.33 to $ 2,856.65, but five minutes later it plunged to $ 0.0007.
While Bitcoin, the world’s first cryptocurrency, arose out of the 2008 financial crisis in India, it was around 2015-16 that digital currency began to gain attention. In March 2020, the Supreme Court overturned the RBI’s decision to reduce the money supply of crypto exchanges, resulting in an exponential increase in investment flows in crypto assets.
During the ICC T20 World Cup in October-November, cryptocurrencies practically flooded the shows.
Ranveer Singh’s ‘kuch toh badlega’ campaign for crypto trading platform CoinSwitch Kuber, which ran several times during World Cup matches, was among those aimed at millennials in Tier 2 and Tier 3 cities. Its tough sales were based on the low entry barrier for those looking to invest in crypto and the ease of trading on a platform that now claims to be India’s largest crypto asset.
CoinDCX, the rival platform of CoinSwitch Kuber, has hired actor Ayushmann Khurrana. Several other smaller exchanges have also joined the advertising pitch. Reports have set the collective advertising spend of crypto players at a cumulative Rs 50 crore during this World Cup.
The buzz has had an unexpected consequence: a flurry of meetings in political circles and regulators have stepped in to temper the claims of the exchanges.
On November 3, a group of 13 members who are part of the cryptocurrency ecosystem published an advertisement which read: “Indian crores have invested over Rs 600,000 crore in crypto assets. Through the advertisement, the group – including the Internet and Mobile Association of India, the Blockchain & Crypto Assets Council (BACC), crypto exchanges and others – said it is committed to complying with the code of conduct. self-regulation of BACC and ensure safe access to millions of investors.
This statement follows alarm bells being sounded at various levels – within government, regulatory circles and leaders of the investment fraternity. So far, from early feedback, they don’t seem to be on the same page.
While the Prime Minister’s November 13 meeting on the way forward for the sector called for “progressive and forward-looking” measures, RBI Governor Shaktikanta Das advised caution.
On November 16, speaking at the SBI banking conclave, he said the issue raised “serious concerns about macroeconomic and financial stability” and that he “had yet to see a serious and well-rounded discussion. informed “about it.
The RBI has indicated in the past that it is “very much in the game” and is preparing to launch its own digital currency.
Capital market regulator SEBI, meanwhile, has reservations about regulating cryptocurrencies as a financial asset, while a parliamentary standing committee on finance, which met on November 15, is is in favor of the regulation of cryptocurrency exchanges.
The path to follow
It is this view – that digital currencies be regulated, instead of an outright ban – that is gradually gaining ground.
Speaking to The Indian Express at a brainstorming session, Nilesh Shah, MD Kotak Mahindra AMC and part-time member of the Prime Minister’s Economic Advisory Council, also spoke in favor of this.
“I’m not qualified enough to say whether crypto is a fraud or not… who knows, it may be the future and we are the first entrants. So why not regulate and make people realize that this is high risk and high return? So that tomorrow, if it escalates, it does not endanger many investors, ”he declared.
Ashish Singhal, Founder and CEO of CoinSwitch Kuber and Co-Chair of BACC, whose ads Ranveer Singh caused a stir, said: “I think that’s (the ads) one of the reasons this was called out. emergency. But the crypto industry was booming even before the ads came out, so there is no point in removing an industry… We have to come out of the shadows… How do we provide the right education to the user and make sure he understands the risk when he gets in… So it is certain that guidelines and self-regulatory organizations are needed to define what is allowed. “
Avinash Shekhar, co-CEO of the ZebPay cryptocurrency exchange agrees. “We are awaiting further details on the bill… The government has taken many positive steps to learn and understand crypto and its impact on all stakeholders – investors, exchanges, policymakers. We therefore look forward to a crypto bill that takes into account all the contributions of these discussions, ”he said.
Aditya Singh, the investor and YouTuber, is not disturbed by reports of a ban. “I think everyone reads too much in the bill. The Minister of Finance has made it clear that we are not going to ban cryptocurrencies altogether. Crypto opened up so many options and became even more relevant after Covid, when jobs declined. For some families, yeh crypto bhagwan ka roop bankar aa gaya hai (it is a manifestation of God), ”he said.