Indian union budget 2018 made an announcement that had cryptocurrency investors and enthusiasts see red. Finance Minister, Arun Jaitley, said, “…The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. The Government will explore use of Blockchain technology proactively for ushering in digital economy.”
Following the announcement, Bitcoin prices fell to a two-month low of $7,000 and several banks pulled out from crypto exchanges. Rumors are rampant that cryptocurrencies and exchanges will be banned in the country. Ajeet Khurana, the Head of the Blockchain and Cryptocurrency Committee of India (BACC) and Internet and Mobile Association of India (IAMAI), clears the air by stating in an interview:
“The FM’s announcement gives no indication that the government is banning cryptocurrencies or exchanges. Neither does it stop people from holding a cryptocurrency. It is just saying that the government doesn’t recognize cryptocurrency as money, which no country in the world does except Japan. It doesn’t mean crypto trading is illegal, but comes with its own risks like any other investment asset in the market.”
In Khurana’s words, the backlash is more of a knee-jerk reaction and stems from a lack of awareness about cryptocurrencies and exchanges. Though he supports the government’s cautious stand in wake of numerous money laundering and fraud cases revolving around cryptocurrencies and unregulated exchanges, he feels that the technology in itself is nothing short of marvelous, and the very fact that it finds a place in the annual budget is proof enough of its scope and reach.
Panel to examine crypto exchanges
After the announcement, SC Garg, Secretary of Economic Affairs, announced setting up of a panel to examine unregulated crypto exchanges. Digital assets transfers will be looked into closely. Most registered crypto exchanges have been using robust risk management and Know Your Customer (KYC) policies and tools. These are at par with those used by top banks. All these measures should instill confidence in investors.
IAMAI Investing in Spreading Crypto Awareness
The biggest risk in crypto trading, according to Khurana, is the investors’ lack of awareness of its risks. While cash, stocks and gold have been around from ages, crypto currencies are fairly new and unfamiliar to non-technical community. So, efforts should be made to educate people about crypto to enable them to take informed decisions. “Right now, the general understanding of the term Bitcoin in India is vague. There are a lot of people in India who are intrigued by the technology but don’t understand it well enough.”
Bitcoin Trading Volume in India On an Upswing after Budget 2018 Warning
Despite these facts, Crypto trading volumes in the country are rising unabated. IAMAI and BACC are investing in online courses, educational videos, and teaching resources to teach people about crypto products and their associated risks. Certification courses with self-assessment tests are being formulated so that people can gauge their Bitcoin knowledge before diving deep into trading. The courses will teach basics about cryptocurrency security, privacy and process.
Blockchain Foundation for Industry Collaboration
Amid bad news, comes a ray of hope for blockchain entrepreneurs. The IAMAI and the Digital and Blockchain Foundation of India (DABFI) have announced setting up of the Blockchain Foundation of India (BFI). The BFI will be a collaboration platform for all blockchain experts, CXOs of blockchain-based initiatives and government bodies. Here, they will be able to exchange ideas and explore possibilities of expansion and growth.
The present government may be wary of cryptocurrencies , it is open-minded about the potential of the underlying blockchain technology. They have even hinted at contemplating legitimate use and applications of the technology. Research firm PwC conducted a survey among Indian companies and found 56% respondents including blockchain in their innovation and expansion plans for 2018.
Efforts to legitimize Crypto Adoption
As with any new technological disruption, the initial phase is of unregulated growth and speculation. Later, regulation and correction takes place and processes and policies are strengthened. Similarly, Bitcoin trading should be made legitimate. Proper policy framework around cryptocurrencies should be introduced this year. Large crypto exchanges already follow preventive and risk management processes,. They should be standardized for all exchanges throughout the country. Once these wrinkles are ironed out, investors will feel more confident placing their bets on Bitcoins and its cousins.