cryptos: RBI bats to prohibit cryptos but industry see a silver lining

Synopsis

“Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards,” FM’s reply said.

New Delhi: Finance Minister Nirmala Sitharaman’s written response in Parliament again brought the ‘spotlight’ to crypto assets or virtual currencies (VCs) as she called for ‘global collaborations’ to prohibit these assets.

However, the industry, as always, is reading too much between the lines, taking out the positive for the industry with some silver lining for the stakeholders.

“Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards,” FM’s reply said.
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However, one should remember that the Reserve Bank of India has always been a vocal critic of the private cryptos and called out to impose a blanket ban on them. RBI sees VCs as a potential threat to economic and financial stability.

On the other hand, the industry believes that the government’s stance on virtual currencies has softened, and it has no intentions to outrightly ban cryptos anytime soon.

Khaleelulla Baig, co-founder and CEO, Koinbasket, said that the finance minister is playing safe by adopting a ‘wait-and-watch’ strategy. India is on the brink of losing the opportunity to become the crypto leader because of its hawkish stance.

“The next wave of crypto adoption in India will be so impactful that the government would be compelled to legalize and regulate the Web 3.0 space concerning the larger flow of public interest, economic incentives, and opportunity cost,” he added.

Pearl Agarwal, Founder & Managing Partner, Eximius Ventures, said that regulation is necessary to ensure that the government and RBI can better manage monetary policies, but outright ban on an emerging technology would hamper India’s position as a technology leader in the world.

“We believe that as the world moves towards a decentralised internet, innovative solutions developed at the national level and a pragmatic regulatory framework is the only way to ensure that we continue to keep up with global innovation,” she added.

Other experts believe that technology can not be banned, but regulations can prohibit or restrict them. On the other hand, one can not overlook the currently grim status of the crypto industry.

The clarity that has come is that India will not take a unilateral stand, and so we are moving away from banning and not towards it, said Ajeet Khurana, Bitcoin Expert, Reflexical, in an interview with ET Now.

“Nobody in crypto has asked for it to become legal tender,” he added. “Interestingly, regulators talk about it, but people involved in crypto are not even making such a demand.”

Also, crypto and blockchain is a global phenomenon, and it will be difficult to regulate the crypto industry based on isolated policies by various countries.

“International collaboration on the evaluation of risks and benefits is going to be hard because there are countries who already implemented policies to regulate cryptocurrencies and have a better understanding,” said Tarusha Mittal, COO, and Cofounder, UniFarm.
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    Updated: 07/19/2022 — 14:00