2021 has been a remarkable year for cryptocurrencies, from a global perspective and India-wise as well. If we consider the global inflow of digital coins, the figure has reached $9.5 billion mark. This is a remarkable increase from 2020, wherein the figure stood at $6.7 billion.
Remarkably, the most popular digital coin through these times is Bitcoin. When compared to its December 2020 levels, the coin will end at nearly double the value in 2021. Bitcoin nevertheless reached an all-time high in November 2020 at $69,000. It is now 32% below the level reached then, at $47,043. A range of factors stands behind the development. They include China’s crackdown on Crypto and the tax provision in US infrastructure legislation. Similarly, as India proposed legislation to ban private coins, it resulted in panic selling.
Among the other top digital currencies is Ether, which also features the second-highest market value in the world. As of current, Ether trades at around $3,753.
In the years 2020 and 2021, cryptocurrencies made a foray into the Indian markets. 2021 saw the rise of digital coins, keeping the Indian perspective in mind.
For the very first time, investments in crypto coins breached the 10 billion mark in India. In April last year, the figure stood at $923 million.
As per the findings of CREBACO, which is crypto research and intelligence business, 7.9% of India’s population of more than 105 million people have made an investment in crypto coins at this time.
When compared to fiat currencies, cryptocurrency is a decentralized alternative. They were earlier used merely for transactions, but have now transformed to an asset class. More and more people, by the day-use cryptocurrencies to remit money abroad. This way, they can bypass the steep charges charged by the banks or money wire services. For Indian ex-pats, cryptocurrency has become the preferred medium for remitting money back home.
Brokerchoose is a comparison platform based in India. In October, Brokerchooser said that the highest number of crypto owners that India has ever had is 10.07 crores. It was during this time that the US used to be the second at 2.74. Russia, through the time, had 1.74 crore crypto owners and Nigeria 1.30 crores.
On a good day, the market capitalization of all the cryptocurrencies in the world will stand a $ 2 trillion. So, cryptocurrency enjoys a cult-like following but has still ceased to find the preference of serious investors.
Crypto has a decentralized nature and correspondingly seems like a suspicious proposition to regulators and central bankers. This has to be the case, with cryptocurrencies being widely used for criminal activities like money laundering.
A deeper perspective over the future of cryptocurrencies in India shows that it to date hangs in a balance. The spotlight has now shifted back to the RBI because it has asked banks that services to cryptocurrency dealers should not be denied.
On May 31, RBI has told the banks that they should not cite the order issued by RBI in 2018, which stated that banking services should be denied for the customers who dealt in cryptocurrencies.
It is noteworthy that in March 2018, the Supreme Court of India had set the order aside. So, a bank citing the order beyond this date would be inappropriate.
But, the central bank has asked the banks to tread with great caution and act with due diligence. Cryptocurrency traders constantly stay in watch under the rules associated with the prevention of terrorism and money laundering.
It is noteworthy that in March 2021, the Supreme Court of India overturned RBI’s 2018 circular. This was in the Supreme Court judgment over Internet and Mobile Association of India vs. RBI.
SC’s viewpoint over the matter was that since there is no legislative ban in place over the purchase or sale of cryptocurrencies, disproportionate restriction over the trades involving cryptocurrencies cannot be imposed by the RBI. The court had the opinion that this would hamper the fundamental rights of the citizens of India. This is concerning the right to carry out a trade that the law finds legitimate.
Is overturning the 2018 order a stamp of approval for cryptocurrencies?
No, because when SC overturned the order, it furthermore stated that currently, imposing heavy restrictions over cryptocurrencies would have no legal basis. But, the court may not have this view over the days to come. This will become the case when a law is passed in the parliament which will ban the use of cryptocurrencies.
RBI, on the other hand, has compulsions for giving clarifications over the matter. Numerous banks have to date used the 2018 circular to stop customers from dealing with cryptocurrencies.
To date, banks express their reluctance to halt customers from dealing with cryptocurrencies. The uncertainties surrounding the legality are the reason behind this development.
The future of cryptocurrencies in India
When we consider the opinion of the cryptocurrency skeptics, they believe that one day; all governments from across the world will ban cryptocurrencies. The reasoning behind this school of thought is their opinion that the governments from across the world, and their central banks would avoid the dilution of their monopoly power over money.
The perspective of the Indian government has been conflicting over this matter. In March 2021, FM Nirmala Sitharaman stated that a total ban over cryptocurrencies is not going to take place. Nevertheless, the center is planning to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. This bill has some provisions that propose the total ban of cryptocurrencies in India.
With no such bill to be introduced in the winter session of the parliament, we cannot be sure about the future of cryptocurrencies in India.
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