Cryptocurrency and India: A Brief History

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.