With a bill coming on cryptocurrencies, the government has managed to again create an air of Fear, Uncertainty and Doubt – FUD – in the industry. Last week, a parliamentary panel was set up with BJP leader Jayant Sinha as the chair to decide the final shape of the much-anticipated bill. Blockchain and Crypto Assets Council (BACC), industry bodies and other stakeholders had made their submissions to the panel.
In India, the startup space is responsible for the mainstreaming of cryptocurrencies. CoinDCX becoming a unicorn and WazirX’s acquisition by Binance made India the largest crypto economy in startup activities. Crypto exchanges such as these are also significant drivers of the crypto movement. They claim to represent the crypto-community in India. Currently, there is no voice of the people engaged with cryptocurrencies independent of that of the companies. There is also a vacuum of research studies in this area that could help policymakers gauge necessary perspectives.
Viable plans for India
Ever since the bill on cryptocurrencies was first drafted in 2017, drawing upon the Garg Committee Report, industry players have been running into troubles with regulators and the government. The Reserve Bank of India (RBI) issued a notice barring banks from providing services to the crypto industry in April 2018. Post which WazirX started the #IndiaWantsCrypto campaign on Twitter in November. IAMAI took the case to the Supreme Court and received a favourable verdict resulting in RBI withdrawing the circular. Currently, RBI is primarily vested with all the power to draw the course of the future of cryptocurrencies. However, in the past, RBI has consistently excluded digital currencies from its policies, such as Regulatory Sandbox. Sandboxes allow participants to test new products, services and business models with consumers in a live environment and are subject to oversight. In 2021, the outfall of Binance in the global market due to regulatory violations had also put Indian firms associated with Binance in a spot. Cryptocurrency exchanges were also questioned for their unethical advertising without warning about financial risks.
When the government launched E-RUPI, people hailed it as some proto version of digital currency. On several occasions, finance minister Nirmala Sitharaman has commented that the ministry isn’t anti-cryptocurrencies and acknowledges its potential. MEiTy has declared blockchain as a technology of national importance. RBI Governor Shatikanta Das, in a lecture for Vidhi Center for Law, said that Central Bank Digital Currencies (CBDCs) is a more safe, viable option for India. India is one of the several countries that have expressed an intent to go forward with a CBDC. However, it lacks a plan while many others are in the final stages of their experimentation. Many sympathisers of cryptocurrencies have suggested that private and CBDCs should coexist as the latter is not a perfect version of the former.
Going beyond polarised debate
The discourse in public on cryptocurrencies is highly polarised. The narratives surrounding cryptocurrencies are either of deep suspicion or blind hero-worshipping. Both equally unaware of the socio-political implications that it has. The startup space is thriving on foreign funding. It can afford to create narratives that forward their interests alone. The sudden surge in advertising such as CoinSwitch Kuber sponsoring the column on cryptocurrency on Gadgets360 is an example. Sympathisers of cryptocurrencies and blockchain technology often miss out on critically engaging with the concerns raised by the government and other stakeholders.
The tussle between the government and capitalists has endangered people’s perspective in the grand cryptocurrency debate. Blockchain technology and digital currencies promise the people to bolster financial inclusion by serving those excluded by traditional financial institutions. That is why there are high adoption rates in Latin American and African countries. In countries with political instability like Venezuela, the standard currency has lost all money, and formal financial institutions did not safeguard people from the economic crisis. To salvage its failing economic and financial institutions, countries like El Salvador have hurriedly declared Bitcoin as legal tender. It also distributed monopoly rights to industry players who could sell the narrative that the unbanked and migrant population was better off receiving remittances in the form of cryptocurrencies.
There is a grave assumption that cryptocurrencies have nothing to do with institutions. The cryptocurrency space, like any other sector, absolutely needs a legal, safe harbour. Legislations are essential in defining the scope of private players’ powers and the clients’ rights. Clear and practical definitions and classifications enable executives to regulate the sector more effectively. International law and legal developments in other countries have a decisive impact on the legislative process and policy advocacy. Upcoming national legislation in developing countries such as Turkey and Uruguay and FAFT and G20 obligations do put substantial pressure on the government to formulate a policy that aligns with larger economies.
The Indian government must forge a path that distinguishes it from the countries that use cryptocurrencies as a desperate measure or buy into the narratives of crypto capitalists. The absence of academic literature on cryptocurrencies is gnawing and significantly hampers the ability of policymakers.
Nishtha Gupta is a student at TISS, Hyderabad. Views are personal.