Sources familiar with the matter told Bloomberg that the federal government is not keen to have cryptocurrencies functional within the country’s monetary system. This will be a major blow to crypto enthusiasts in India who have been left at the mercy and the whims of the regulators.
Previously in 2018, the Indian central bank introduced a ban on cryptocurrency trading. The Reserve Bank of India (RBI) asked all registered banking institutions to cut their ties with local crypto exchanges and trading platforms. This resulted in a massive liquidity crunch following which many crypto exchanges went out of businesses within months.
However, the Indian crypto community fought the lawsuit valiantly in the Supreme Court of India. The result was, in March 2020, the Supreme Court lifted the ban giving relief to Indian crypto investors.
Over the last six months, Indian investors have been largely leaning towards the crypto market, especially Bitcoin. Besides, the Coronavirus-led economic crisis and unemployment have fueled investors’ inflow in Bitcoin for hedging risks.
Indian Central Government Remains Keen on Blockchain Development
While the Indian central government has shown a hostile attitude towards cryptocurrencies, it remains keen on blockchain development. Niti Ayog, the financial think tank for the Indian central government, is exploring different use-cases for blockchain in FinTech and other areas.
The transparent and tamper-proof nature of blockchain has also encouraged local state governments to explore its use in transactional records and databases. This includes creating blockchain-based educational certificates, land records, or the pharmaceutical supply chain.
India’s decision on crypto is key to the overall growth of the sector in Asia. With the Supreme Court lifting the ban in March 2020, major crypto exchanges like Binance has announced huge investments in India. Thus, any hard decision from the government will discourage foreign investments in the crypto space.
On the other hand, the Indian government has also remained quiet about any plans on developing its central bank digital currency (CBDC). India is yet to unveil its blueprint or any major conceptual research with Digital Rupee. Other economic giants like China have already raced to this opportunity. Moving from its research stage, China has already floated the concept design for Digital Yuan and started experimenting at the local level.
We have yet to hear any official statement from India’s Finance Ministry on the latest developments.
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