The debate over regularisation of cryptocurrencies in India has been running long, with both the finance ministry and Reserve Bank of India (RBI) mulling on the future course of action.
Looking at the price fluctuations, the most successful, yet unstable digital currency would definitely be Bitcoin. Considered to be the most popular cryptocurrency, Bitcoin's lowest traded price was $25,987 while it reached its peak price of $68,789 in 2021, says data compiled from coinmarketcap.com.
On December 28, its price dropped by $3,848 within 24-hour trading and settled at $47,518.26. Bitcoin's market capitalisation was $904,918,128,064.42, while its market dominance was 40.33 percent.
The second most popular currency Ethereum too saw drastic fluctuations in 2021. Its lowest was recorded at $692 and the highest trading value reached $4,891.7 within a period of just 365 days. On December 28, the price dropped by $300, which let it trade at $3,792. Despite having a market capitalisation of $448,879,821,921.82, and market dominance of 20.05 percent, Ether faces the same challenge of instability as bitcoin. Similar are the conditions of other popular cryptocurrencies.
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With this volatility in nature, concerns over the sustainability of digital currencies are genuine. And if Finance Minister Nirmala Sitharaman and her team is delaying the process of bringing a bill on it, this indicates the financial experts want to be sure before taking any step forward.
Crypto trading in India in 2021:
In a single year, investment in cryptos burgeoned by almost 400 percent, surging from $923 million in April 2020 to almost $6.6 billion in May 2021.
Cryptocurrency exchanges like WazirX acknowledge that meme coins SHIB and DOGE, along with MATIC and BTC (Bitcoin) were amongst the most popularly traded coins in India in 2021, and may remain so in 2022.
As the winter session of Parliament wound up on December 23 without any deliberations on the crypto bill, experts believe the government will come up with something concrete in the Union Budget 22-23 session.
RBI's take
Earlier in November 2021, the RBI told its board that a complete ban on crypto was needed as partial restrictions won't work. This came after the Supreme Court's 2020 ruling, in which the apex court set aside RBI 2018 order to banks not to facilitate crypto trade. It is to be known that RBI has been a staunch opponent of crypto since 2013, as it felt that the digital currencies may undermine its regulated entities and destabilise the economy.
Apart from destabilising the economy, cryptos' extreme price volatility and difficulties in tracing transactions were other issues ahead of RBI.
To counter private cryptocurrencies, RBI is mulling a strategy to roll out a central bank digital currency (CBDC). In the 592nd meeting of the central board of directors, held in Lucknow, the apex bank even discussed various aspects related to the CBDC and private cryptocurrencies. Though nothing can be speculated as of now.
Meanwhile, work is underway to bring in an official digital currency by the RBI to promote Non Fungible Tokens (NFTs), which is also being discussed by the Centre.
Finance Ministry's take
Clarifying the government's stand, FM Sitharaman on November 29 informed the parliament that "There is no proposal to recognise Bitcoin as a currency." The Finance Minister also said in the written response that the government does not collect data on Bitcoin transactions.
"No, sir". Sitharaman said to a question "Whether the government has any proposal to recognise Bitcoin as a currency in the country?" by members of parliament Sumalatha Ambreesh and DK Suresh, Sitharaman.
Also, responding to a question by Thirumaavalavan Thol in Parliament, MoS Finance Pankaj Chaudhary, said, “Cryptocurrencies are unregulated in India”. Thol asked the Ministry if the government was aware of the cryptocurrencies that are traded in India and whether trading in cryptocurrency was legally permitted in India.
However, with speculations over cryptocurrency's legality rose from time to time, Sitharaman said on December 4 that the government will bring a well consulted cryptocurrency Bill.
Speaking at the Hindustan Times Leadership Summit 2021, the minister, however, reiterated that unregulated speculation about the developments in crypto space is ‘unhealthy’, quoted LiveMint.
What to expect in 2022?
2022 may be a year of solutions and clarity for crypto trading in India. First the government may bring a bill to regulate the cryptos, and second to bring the digital currencies under the ambit of Securities and Exchange Board of India (SEBI).
On the issue of banning advertisements, FM Sitharaman has already informed the country, through Rajya Sabha, that they won't be banned. However, the FM added that steps are taken to create awareness through the RBI and SEBI.
"This is a risky area and not in a complete regulatory framework. No decision was taken on banning its advertisements. Steps are taken to create awareness through RBI and SEBI. The government will soon introduce a Bill," Sitharaman said during the Question Hour in Rajya Sabha during the Winter Session.
There are numerous questions regarding the future of crypto trading in India, but the possible solutions will take some time. As previously mentioned, both the Finance Ministry and RBI are cautious, and at the same time concerned over the volatility of price fluctuations in cryptos.
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