Crypto exchanges hopeful of a middle ground on regulation even as RBI Guv raises red flag

Cryptocurrency (Representative image: Reuters)

Even as stakeholders in cryptocurrencies await a long-pending law to regulate crypto in India, Shaktikanta Das, the Governor of the country's central bank, has raised concerns, once again.

Speaking at an event on September 9, RBI Governor Shaktikanta Das said, “We have serious, major concerns on cryptocurrency with respect to financial stability, have conveyed the same to government of India.”

The central bank has conveyed its concerns on cryptocurrency to the government and it is up to them to take a call on the matter, Das said, adding that there needs to be more clarity on the contribution of cryptocurrency to the economy.

On June 4, too, the Governor had voiced similar concerns. But what is different this time is that the bill is close to being taken up by the Cabinet, and the crypto world is hopeful of a middle path. Is this then a subtle message going from RBI to North Block?

Nischal Shetty, Founder of crypto exchange WazirX said, “Cryptos can be classified in many ways and currency happens to be one of those. RBI sees it from a perspective of a currency. But, the expectation is that the government will categorise cryptos as assets or currency based on the nature. In that case, RBI’s comments are not very concerning because no one has raised concerns over crypto as an asset class.”

“The community has never pushed for crypto to be used as a currency, we have only pushed for it to be accepted as an asset,” Shetty added.

ZebPay’s Co-CEO Avinash Shekhar believes that RBI’s concerns can be solved through dialogue and that every new innovation faces questions.

“I am sure the RBI Governor has some basis for what he has said. We can try to address those through dialogue. The government will listen to the RBI as well as to the crypto community and hopefully, we will have a middle ground,” Shekhar remarked.

Unocoin CEO Sathvik Vishwanath explained, “Firstly we need to see how RBI and the government define private cryptocurrency. If they deem all cryptos except Central Bank Digital Currency (CBDC) as private and say it should be banned, then that is a bad idea. India has a history of reacting like that so that is concerning.”

“Banning cryptocurrencies will set India back, we already are behind by two years on crypto adoption,” he added.

Another industry executive said, requesting anonymity, “RBI is just being consistent in their views on cryptocurrency. They are sticking to the view that they have concerns. I don’t see anything new beyond it.”

“RBI too is working on CBDC (Central Bank Digital Currency) which is built on Bitcoin’s technology. So, if they considered cryptocurrencies a complete failure, then why would they even attempt to come up with a CBDC?” he questioned.

A CBDC is in the works and Deputy RBI Governor T Rabi Sankar had said in July that RBI is currently contemplating a phased implementation strategy and examining use cases.

Finance Minister Nirmala Sitharaman had said in August that the cabinet note on the crypto bill is ready and Cabinet’s clearance is awaited. The FM has earlier clarified that the government was open to exploring various options on crypto adoption.

According to data from crypto exchanges, there are approximately 1.5 crore Indians who have invested in cryptocurrencies holding worth Rs 15,000 crore, and the interest is only rising. There are 350 startups that operate in the blockchain and crypto space.​