#IndiaWantsCrypto Leads Pushback Against Specter Of New Ban
#IndiaWantsCrypto, a hashtag popularised in 2018 when the Reserve Bank of India effectively banned trade in tokens like Bitcoin, is back again. This time, it's fighting the specter of another ban which may be considered by the government as part of ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ slated for the current session of parliament.
The hashtag is part of a wider lobbying effort by India’s young crypto community, which is using all available digital tools to convince government officials against a ban on cryptocurrencies. They may not have the lobbying heft that traditional industries do, but that’s not stopping them.
#IndiaWantsCrypto, for instance, has engaged nearly 27,000 users in the past week alone, according to data from online hashtag tracking tool TalkWalker. All local crypto exchanges, including WazirX, Unocoin, ZebPay and CoinDCX among others, are using it, along with other similar hashtags, to push their case.
Another such campaign, indiawantscrypto.net, which was started on Feb. 4 has seen about 15,000 e-mails sent to Lok Sabha representatives across various constituencies over the past six days, claims homegrown crypto exchange WazirX.
Indiawantsbitcoin.org is also encouraging cryptocurrency supporters and local investors to write letters to their Lok Sabha representatives asking for prudent regulations without altogether banning cryptocurrencies.
Away from the organised efforts, telegram channels, Reddit communities and social media groups reviewed by BloombergQuint are flooded with supporters voicing their concerns and dissent over the government’s move.
“India needs Bitcoin, India needs Water, India needs electricity,” wrote one reddit user on a r/Bitcoin thread. “India will lose big time if btc (Bitcoin) is banned. It's like the govt WANTS us to stay poor,” said another. “Instead of banning, if they regulate crypto industry, they will be able to collect more tax..,” argued a third on a telegram group, WazirX Discuss.
While there is no official data available on the number of cryptocurrency investors in the country, the three largest crypto-exchanges—WazirX, Unocoin and CoinDCX, claim that there are anywhere between 60 lakh and one crore cryptocurrency holders in the country with holdings of over Rs 10,000 crore.
“The move took the entire industry by surprise as nobody had the slightest idea that the government could consider banning cryptocurrencies after the Supreme Court set aside a similar order last year,” said Nischal Shetty, chief executive of WazirX. "We are requesting the finance ministry and regulators to refer the bill to a standing committee for industry participation," Shetty said.
Going Round In Circles
In March last year, the apex court quashed RBI’s 2018 circular that barred banks and other financial institutions from facilitating transactions involving cryptocurrencies, observing that such a ban was 'disproportionate'.
Since then the government has been debating its approach towards these units, which have seen a spurt in price and interest over the past year. This week, Bitcoin prices hit a new high of $48,000 after Elon Musk’s Tesla Inc. invested $1.5 billion in it. Acceptance of cryptocurrencies has also been growing among traditional payment firms such as Mastercard and Visa. In India, too, investment interest has risen from existing and new users.
Should India impose a blunt ban amid this growing acceptance of cryptocurrencies? Most large countries have not banned crypto but some smaller ones like Nigeria have.
Contents of the government’s proposed bill are not in public domain yet but, on Feb. 9, in response to a query in the Rajya Sabha, Finance Minister Sitharaman said a high-level inter-ministerial committee had proposed that "all private cryptocurrencies, except any cryptocurrency issued by the state, be prohibited in India". The government, she said, would take a decision on the recommendations of the committee report and the legislative proposal, if any, would be introduced in the parliament following the due process.
While the initial understanding is that private cryptocurrency means anything not issued by the state, Rahul Pagidipati, chief executive at ZebPay said that the definition of what the bill calls “private cryptocurrencies” is not a common term.
"Bitcoin is not privately owned by anyone. It is a public good, like the internet. Bitcoin and most crypto assets are more like gold and not an alternative to government-issued legal tender," he argued.
Former RBI Deputy Governor R Gandhi is not sympathetic to that view. Since RBI is the sole issuer of legal tender in the country, any virtual currency outside its regulatory purview needs to be prohibited. This, as “unregulated cryptocurrencies becoming valid payment instruments directly infringes upon the powers of the central bank.”
Uncertainty For Investors
While the crypto community is pushing back and authorities are still to make their position clear, investors are nervous.
“The impending bill has caused a lot of unnecessary clamour and confusion in the industry and among local cryptocurrency investors, which has led to some amount of panic selling since Jan. 29 in anticipation of the draft bill getting passed. But the volumes stabilized a bit with Tesla backing it," said Sathvik Vishwanath, co-founder and chief executive of cryptocurrency exchange Unocoin, without giving the exact numbers.
Considering there is no copy of the draft bill available, he said that any kind of advice to crypto investors will not be an informed one.
Sumit Gupta, co-founder and chief executive of cryptocurrency exchange CoinDCX said that even if a ban does get announced, investors can still sell via global trading platforms such as Binance, Huobi, OKEx, among others. He, however, added that the community will continue to push back. "We are not going to stop no matter what happens, because banning cryptocurrency is not the solution. It will have to be regulated," Gupta said.
In a letter dated Feb. 3, sent to several members of parliament, the not-for-profit industry body Internet and Mobile Association of India, argued that a ban would confiscate wealth of crypto investors and deprive them of their legitimate property. The letter, a copy of which has been reviewed by BloombergQuint, added that a ban on cryptocurrency would “eliminate responsible players and result in a grey market.”
Gandhi said that a middle ground that can be sought. “The solution could be that cryptocurrency be defined as a non-financial asset, and not as a security or a currency. As a non-financial asset, mature investors can choose to trade in the same,” he said.