Regulation delay could benefit crypto industry, but long way to go, say experts

The virtual currency bill was expected to be tabled in the parliament recently, but that did not happen. This sparked off a wave of reactions. Some crypto stakeholders were dismayed by regulation getting postponed, but there could be a silver lining too.

To understand what this decision means to experts, Moneycontrol's M. Sriram and Chandra R Srikanth hosted an episode of Crypto Bill Delay - Boon or Bane? on Twitter Spaces.

The speakers included Kashif Raza, co-founder, Cryptokanoon; Arup Roychoudhury, who leads economy and policy coverage at Moneycontrol; Sandeep Parekh, managing partner, Finsec Law Advisors; Navin Surya, Board Member, Blockchain And Crypto Assets Council and Sathvik Vishwanath, CEO and co-founder, Unocoin.  

Here are key takeaways from the session: 

Crypto bill not tabled in Parliament session

Kashif Raza: I am happy as the government is not in a hurry to pass a bill, and I am sure this bill will be discussed with  Shekharan and Ashwini Vaishnaw as they are techies, and they will put in a lot of technical inputs to this bill.

Navin Surya: It's good that deliberation is happening. Outright banning in India never works. We have seen what has happened with gambling bans and liquor bans. It only creates more criminals and a black economy. Having the proper discussions with the right stakeholders is essential. We are all in for regulation and not banning.

Sandeep Parekh: The bill will come. It may not happen in the monsoon session, but it will be a hard-hitting bill to ban crypto. If there were any rethinking, they would have sent it back to a parliamentary committee, and I don't see that happening.

Arup Roychoudhury: Despite the Supreme Court direction last March, the RBI is still in favor of the ban; the government is more liberal as it does not see a ban. They recognise that this is going to balloon into a significant asset class with many investors. So it is better to regulate it than ban it. So a ban is unlikely but will be heavily regulated.

The government does not think that the crypto ecosystem has a tangible impact on the real economy. 

Sathvik Vishwanath: India is not a country where you come up with regulations, and every few weeks, you keep changing them. When regulations come up in India, we live with them for decades together. Whatever is happening with the regulators now is what we were hoping for, where they continue to take the wait-and-watch policy. To come up with regulations with loopholes will be a disaster in India.

Has the government come around since the draft bill was proposed? 

Navin Surya: The RBI and the government know that you need to regulate it to have better control.

Just banning will not solve anything; it will only shift the onus from the real people who understand and control it to general enforcement agencies like the police. The new breed of entrepreneurs wants to create value for the ecosystem and the country. So they are working closely to note which all can follow in the absence of regulation and avoid incidents and accidents when the real rules come into place. 

Kashif Raza: India can take the approach of the US. There is no clear bill that the US Congress has passed on crypto, but the agencies that are deployed by the federal government perform their checks. They are not trying to kill the industry. We have all the laws in India that govern banking and fintech; we only need to bring in crypto space under the umbrella.

Arup Roychoudhury: We need to demarcate under whose guidance will the crypto ecosystem come if it is treated as an asset class, who will it come under and, what role will income tax have in this, what role will SEBI have, etc. so that balance the government has to get. 

Challenges of the bear market

Satvik Vishwanath: We are unsure if the bull market is over and the bear market has started for the long term. There could be ups and downs. As compared to 2017, when crypto was at its peak, we see push-based marketing through ads that are reaching first-timers who have never heard of crypto. The people who come from the marketing campaigns are not here for the long term; they will either make money or lose money and get out of the market very soon. 

Sandeep Parekh: Whatever the market, I think Five areas need to change for crypto to work; One is KYC, identifying who owns something, the second is it should be challenging to use in crime, which is a significant negative factor in crypto. The third difference is concerning tax. With the current tax regulations, one is obligated to pay tax for even a cup of coffee bought by crypto, which is not working out; there is no exemption for tax laws for people using crypto. The fourth point is the concept of FEMA; we are not capital convertible, so currency cannot go in and out in crypto. The last issue is concerning fraud and Ponzi; it's a very rocky area. We need to address these issues first, and crypto has a long way to go.

Kashif Raza: In the bear market, 70 percent of them are less than 30 years, they take risks and want to make quick money. The youngsters enter the crypto space by following a celebrity tweet, and when they buy a small-cap at an all-time high, the corrections come to 60-70 percent and they run away from the system. 

Some people enter into this space with much knowledge and have a systematic investment plan; those are the people who tend to stay here, so weaker hands move out of the system. The industry is growing and it will prosper. Education will play an important role.  

This space is only ten years old, and there are close to 150 million users globally. However, with each passing year, the volatility is decreasing. As the market evolves, more people enter the market, and the market cap increases and the volatility will decrease. 

Arup Roychoudhury: The market volatility is a concern; the government does not want a volatile market. Whenever a law comes, it will be heavily skewed towards the regulation of the exchanges and crypto startups.