Imposing a total ban on cryptocurrencies is neither feasible nor desirable because large investments have already been made in such instruments
Published Date – 11:30 PM, Sun – 29 October 23
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The expanding cryptocurrency market is both a threat and an opportunity; a threat because it can potentially disrupt the macroeconomic and financial stability of the countries and opportunity because it is technology-driven and being widely embraced by the millennials. The latest estimates show that India has become the world’s second largest cryptocurrency market, after the United States, in terms of transaction volume. This is despite the imposition of 30% tax on gains and tax deducted at source at the rate of 1% . Investors are getting drawn to trading platforms that are based overseas as new norms make it more difficult for homegrown exchanges to be competitive. A report by US-based blockchain data platform ‘Chainalysis’ says India leads the world in grassroots adaptation. It pegs transactions in the country at over $260 billion. Nearly 66% of all users are below the age of 35. Imposing a total ban on cryptocurrencies is neither feasible nor desirable because large investments have already been made in such instruments. Any isolated attempt by a single country to control the virtual currency market will be of no use. Instead, what is required is a coordinated international regulatory mechanism to bring order to the volatile and unstable cryptocurrency market. Being entirely technology-driven, it is, at present, beyond the control of the regulatory systems. The recent adoption of the crypto roadmap by the finance ministers and central bank governors of the G20 nations to deal with the challenges posed by crypto assets should be seen as a step in the right direction.
The IMF has called for a coordinated global response to ensure a level playing field, covering all aspects of the crypto ecosystem. The advocacy of global coordination and information-sharing on crypto assets and ensuring compliance with FATF (Financial Action Task Force) standards on crypto assets will help curb scams. Lakhs of investors worldwide are still reeling under the multi-billion-dollar impact of last year’s sudden collapse of FTX, one of the world’s largest cryptocurrency exchanges. Remedial steps are urgently needed. Crypto firms based in India have been advocating progressive regulations that act as a major fillip for the industry. This ensures that the crypto asset ecosystem operates within a well-defined regulatory framework, promoting stability and investor protection. Issues such as taxation of assets, a bear market and regulatory uncertainties in the past have hit the domestic crypto firms hard. As the roadmap gets implemented in the future, crypto companies operating in the country will need to invest in compliance measures to adhere to regulations. Undoubtedly, cryptocurrency is a global phenomenon with India’s tech-savvy millennials comprising an ideal consumer segment. While the Reserve Bank of India (RBI) has been a vocal critic of private cryptocurrencies, the Centre is adopting a cautious approach. The RBI has been consistently warning against the risks associated with virtual currencies.
