Cryptocurrency and India: A Brief History
While Finance
Minister Nirmala Sitharaman will present the fiscal budget for 2022-23, the eye
will be on a policy to regulate the cryptocurrency in India. The cryptocurrency
industry is eagerly waiting for a policy and regulation to build confidence among
investors. So far, the journey of digital currency in India was tipsy-topsy.
With more than three million
investors in India, the absence of regulation may hurt the investors, believes the crypto industry. While the central bank was advocating a complete ban, the
government is now drawing a law to regulate the digital currency in the
country.
At a time when the industry
is expecting a robust policy to regulate cryptocurrency, digital currencies
saw a sharp correction. The sudden rise and then a correction is not new in crypto
trading.
History
The popularity of cryptocurrency is gaining in India with
investors from tier two and tier three cities are trying their luck as early
birds to make money. But the presence of digital currency is almost 9 years old
in India. It was first noticed in 2013 when a restaurant in Mumbai, the financial
capital of India started accepting cryptocurrency as payments. Since then, it
did not look back and today, it is one of the most discussed topics among
investors and financial advisors.
The same year, the launch of cryptocurrency exchange
Unocoin was enough to understand that digital currency is going to be here.
The exchange provided a platform for investors to buy and sell cryptocurrency,
especially Bitcoin. The same year, Bitcoin saw a 900% rise, from Rs 60,000
to Rs 60 lakh.
It is then that the Reserve Bank of India woke up and realized
a threat to the country’s financial situation. As there are no underlying assets of these digital currencies, the central bank issued an advisory and banned all kinds
of trade. It also warned people against the use of it.
Following a ban and preventing banks from using their platforms
for transferring money, two PILs were filed in the Supreme Court during 2013-2017.
Interestingly, one PIL requested to ban cryptocurrencies in India, the other
advocated to regulate it. The government acted and formed a committee in 2017-18 to
look into the issues and find a solution.
The RBI decision left the nascent crypto industry in midway
as prices saw sharp correction. The decision also hit the exchanges and many
people became jobless overnight.
The committee formed by the government proposed a complete
ban on cryptocurrencies. It is the Supreme Court that lifted the ban in March
2019. The circular issued by the RBI was nullified and the ban was lifted. The
court said that despite the cryptocurrencies being unregulated, they are not
illegal in India. The decision gave a new life to digital currency in the
country and then it started flourishing. However, the government started
working on it to regulate. The decision also impacted Bitcoin price and it saw over
700 percent rise within a year. Despite SC’s decision, the industry is in
constant fear of a ban to date.
In January 2021,
the government decided to introduce a bill to create a sovereign digital
currency and ban all private cryptocurrencies. Again, it sent a wrong message
for the industry that had seen a revival.
According to the Lok Sabha bulletin dated November 23,
2021, the Cryptocurrency and Regulation of Official Digital
Currency Bill, 2021 seeks 'To create a facilitative
framework for the creation of the official digital currency to be issued by the
Reserve Bank of India. The bill also seeks to prohibit all private
cryptocurrencies in India; however, it allows for certain exceptions to promote
the underlying technology of cryptocurrency and its uses'. The bill was
slated to be tabled in the winter session of the Parliament but
has been once again deferred.
