Is India Ready to Legalize Crypto? Officials Visit Japan & UK to Study Policies
An Indian government official has supported the rumored bill to ban cryptocurrency. | Source: Shutterstock
While the Supreme Court of India hears the crypto exchange industry’s case against the central bank following the latter’s banking ban, regulators are exploring regulatory policies for the nascent sector.
Businesses and associations in the cryptocurrency and blockchain sector are expected to participate in the hearing alongside the Securities and Exchange Board of India (SEBI), to discuss the future of the cryptocurrency market of India.
In its annual report, SEBI revealed that it has sent government officials to Japan, UK, and Switzerland to study cryptocurrency regulations in overseas markets with active digital asset exchanges and communities.
Unexpected Variable
In July, the supreme court of India declined to reverse the ban on cryptocurrency trading imposed by the Central Bank of India, requesting banks to maintain a strict ban on providing any financial services to cryptocurrency-related businesses.
Speaking to Bloomberg, law firm Shardul Amarchand Mangaldas & Co partner Anand Bhushan said that apart from the government’s concerns regarding money laundering, there exists risk in allowing digital currencies as a medium of exchange due to a large amount of speculation and volatility.
“Nobody is able to price the risk currently. The minute you have clarity on exchanges and whether digital currencies can be used as a medium of exchange or payment, or if it is a commodity, there will be less speculation and much more stability in pricing,” Bhushan said .
But, as SFOX head of growth Danny Kim said, the entrance of large-scale investment firms into the cryptocurrency market has led to an increase in stability, as seen in the price movement of Bitcoin throughout August, when it recorded its most stable month since June of 2017.
“Before institutional firms were actively trading crypto or heavily involved (before 2018) bitcoin price differences between exchanges varied as high as 4.5%,” Kim explained .
The increase in stability, as well as the recognition of cryptocurrency exchanges as regulated financial institutions by major regions such as Japan, South Korea, France, UK, and the US could encourage India to reverse its ban.
Analysts expect that the exposure of local government officials to overseas markets that have demonstrated a high level of growth in the cryptocurrency and blockchain space could act as an unforeseen variable that may redirect the long-term strategy of SEBI.
As seen in the 50 percent increase in cryptocurrency and blockchain-related job growth in Asia and the decision of governments to consider the blockchain as one of the three core technologies in the fourth industrial revolution alongside big data and AI, a complete ban on cryptocurrency trading could result in voluntary isolation.
As large the economy of India is, Europe has continued to lag behind Japan and South Korea since 2012 in both trading volume and industry growth due to their initial rejection of the market.
This week, the European Commission, the executive branch that drafts legislation for the EU, acknowledged the cryptocurrency sector as a legitimate industry, given the rapid growth rate of the market despite its volatility.
Valdis Dombrovskis, the vice president of the European Commission, said :
“We also had a good exchange of views on crypto-assets. We see that crypto-assets are here to stay. Despite the recent turbulence, this market continues to grow.”
Risky Game
The government of India is pursuing a high-risk strategy in isolating itself from the global cryptocurrency and blockchain space. Its current approach assumes that the cryptocurrency market of India could develop into a leading sector at anytime, as soon as a regulatory framework is established.
However, as demonstrated by Europe and the discrepancy in market structure between European nations and leading markets like Japan, it takes time, capital, and resources to build the market.
Featured image from Shutterstock.
