India’s crypto regulations have been caught in limbo — here’s how the past few years have played out

  • The Indian government is likely to introduce its crypto bill during the Winter Session of Parliament, which kicks off on November 29.
  • This will be the second time this year that the government has listed the crypto bill as an agenda item.
  • The bill is also expected to take a softer stance on cryptocurrencies as compared to the 2019 draft, which banned all manner of crypto activity — including trading, mining or even holding cryptocurrency.

The Indian Parliament — specifically, the lower house called the Lok Sabha — is set to discuss the country’s cryptocurrency regulation in the week beginning November 29. The lack of change in how the item was listed on the agenda led to some panic selling. Indian crypto exchange, WazirX, even crashed for a bit with investors unable to withdraw or deposit cryptocurrencies.

“The bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” said the agenda description for the crypto bill discussion.

At the center of all the fear, uncertainty and doubt (FUD) are two factors. Firstly, what does the government mean when it uses the word ‘prohibit’ — does it indicate an outright ban or merely terms and conditions on which cryptocurrencies will be allowed? Secondly, what are ‘private’ cryptocurrencies?

This has amplified existing fears within the crypto community about whether lawmakers would be biased against an inherently risky industry, and whether the ruling party would pass the law without taking comments from stakeholders into consideration.

“This phrase causes a lot of confusion because the developers and investors in the world of crypto know that blockchain are meant to be open, public ledgers and there is no such thing as a private crypto. Some people assume the government might be referring to privacy-focused coins but the government’s interpretation is very broad,” Nitin Sharma, partner at Anter India and the global blockchain lead for Anter Global, told Business Insider,

As with any new industry, innovation occurs before regulation can catch up. This was true for industrialisation, the digital age and now web3. The only difference is that when it comes to the world of blockchain, developments are occurring faster than ever before — a growing pain for regulators, stakeholders and investors alike. “A ban is certainly possible but enforcement of that could prove to be troublesome. It will give rise to a lot of illegal activity over the dark web etc. Hence, it will be prudent for the government to regulate it rather than completely ban it,” explained lawyer Siddharth Mahajan, a partner at Athena Legal.

India’s tussle with trying to regulate crypto goes back at least five years when the Reserve Bank of India (RBI) first took notice of cryptocurrencies in 2013. But, as we all know, these digital assets have been around for over a decade.

Most experts argue that regulation that officially makes crypto legal would be welcome, since it would legitimise the industry. “There are 20 to 30 cryptos with an understandable use case for their crypto offering; however, there are more than 10,000 cryptocurrencies. A well-drafted and clearly laid out regulation on cryptos will make it easier for crypto innovators to devise currencies with proper use cases and give security to investors that want to invest in them,” Anirudh A. Damani, a managing partner at Artha Venture Fund, told Business Insider.

Here’s a quick look at how the evolution of cryptocurrencies has played out in India in that time:

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