Ban on crypto set to trigger grey trading

Mumbai: A blanket ban on cryptocurrencies will encourage non-state players thereby leading to more unlawful usage of such currencies, feels Blockchain and Crypto Assets Council (BACC) of IAMAI. In his recent speech, Prime Minister of India had said: "It is important that all democratic nations work together on this (cryptocurrency) and ensure it does not end up in the wrong hands, which can spoil our youth."

IAMAI fully concurs with this view and in its submission before the Supreme Court earlier listed several negative outcomes of a ban such as zero accountability and traceability of the origin and end usage of the cryptocurrencies; besides a complete evasion of taxes. A ban will also adversely impact retail investors, it said.

The Council has always argued in favour of prohibiting the usage of private cryptocurrencies as a currency in India by law since usage as currency is likely to interfere with monetary policy and fiscal controls. On the other hand, the Council has advocated their use only as an asset. The Council believes that a smartly regulated crypto assets business will protect investors, help monitor Indian buyers and sellers, lead to better taxation of the industry, and limit illegal usage of cryptos.

Crypto exchanges based in India offer an effective instrument of monitoring and are dedicated to creating an ecosystem that guarantees investor protection besides bringing both the investors and exchanges under proper tax laws. The Council believes that the efforts of the exchanges should be supported by a law that should enable them to provide safer services to investors and fair taxes to the government. Cryptocurrency is getting widely adopted around the world, as the high rate of returns is luring many investors towards investment in crypto coins, despite it being highly volatile and risky.

As per Triple A, a leading cryptocurrency payments company, global crypto ownership rate currently stands at 3.9 per cent, with over 30crore crypto users worldwide and over 18,000 businesses already accepting cryptocurrency payments.

Even in India Cryptocurrencies has gained prominence ever since the RBI ban was lifted in March 2020. India now has 15 home-grown crypto currency exchange platforms, consisting of more than 10 crore investors.

"Currently there is lot of uncertainty, but government is making efforts to soon put out proper regulation with regards to crypto investment as it is quickly getting widespread across India", says Hemang Jani, head (equity strategy, broking & distribution), Motilal Oswal Financial Services.

According to broker discovery and comparison platform BrokerChooser, the total number of crypto owners in India now stands at 10.07 crore, which puts it ahead of every other country in the world. US stands at second position with number of crypto owners at 2.7 crore, followed by Russia (1.7 crore) and Nigeria (1.3 crore). In comparison, the number of stock investors registered with the BSE/NSE in India has risen to 7.4crore at present, while for MF it stands at 11.4 crore.

Manoj Dalmia Founder and Director-Proassetz Exchange, says, "Looking the high number of investors, the government will not ban crypto in the country. They will be forming a regulatory body to foresee that the investors are not cheated upon the name of crypto."

Once the body is formed, the crypto exchanges will be registered with SEBI or any other regulator in the same way as the stockbrokers are registered with it. Additionally with regards to crypto currency tokens, the government will take some 30-40 tokens and while regulating it with regulator will make them legal so that trading can proceed smoothly. Similarly, if somebody wishes to bring a new crypto token in the market, he/she can go to the RBI for registration, in the way an IPO is listed in the market., he added.

In terms of share of crypto investors as a percentage of population, India stands at 5th position at 7.3 per cent vs Ukraine (12.7 per cent), Russia (11.9 per cent), Kenya (8.5 per cent) and US (8.3 per cent).

Crunching Numbers

♦ RBI in 2018 banned banks from processing transactions relating to cryptocurrency

♦ Ban was lifted in March 2020

♦ India now has 15 home-grown crypto currency exchange platforms

♦ Over 10 crore investors trading in cryptos in India

♦ India has 7.4 cr equity investors with Rs274 lakh cr investment, MF investors are 11.4 cr with total AUM of Rs 37.3 lakh cr

♦ Investors want proper regulation of cryptocurrency trading