The State of the Indian Cryptocurrency Market

By CryptoMood on Altcoin Academy

Cryptocurrencies have been through phases where they were seen as a geeky experiment, a cypherpunk pipe dream, a Ponzi, money for dark web activity, a tool for a great return on investment, scams, and a market-driven by manipulators. Bitcoin has been “banned” by many countries in various ways. However, a market cap of over $200 Billion is not something that a scam can achieve. Bitcoin also completed ten years of its existence and has proved to be the most secure network at this time.

It takes an understanding of technology, cryptography, economics, finance, and advanced mathematics to understand the elegant design of Bitcoin. No wonder most people miss it. But it is widely accepted that Bitcoin’s anonymous creator has cracked the code for a kind of technology that will revolutionize the world. With blockchain technology, any two parties can transact with each other in a trustless environment without the need for a middleman.

Some countries like Malta, Estonia, Singapore, and their governments have been proactive in adopting this technology while some countries like India are yet to take a clear stand.

State of India’s financial market

India presents a paradox when it comes to adopting digital payment technology. India has a hugely diverse and illiterate population but has one of the most advanced digital payments architecture in the world that many developed countries do not.

India has one of the most advanced digital payments architecture in the world that many developed countries do not

However, a technology where anyone can mint their own money and sell it to other people in exchange for Fiat presents a challenge at a different level. Opening the market to such technology will lead to many scams and frauds, leaving many sections of the population vulnerable. In such a scenario, it was not surprising that the central bank of India decided to issue several warnings and withdraw banking support for cryptocurrency trading.

RBI Banking Ban

In April 2018, right after a major bull run in the cryptocurrency market, the Reserve Bank of India decided to ring-fence regulated entities from virtual currencies. This meant no regulated financial institution could work with an individual or a company dealing in virtual currencies. Though it is not illegal to hold, mine or trade-in cryptocurrencies in India, without support from banks, it becomes really difficult to have a free market. In response, many exchanges shut shop, moved abroad, trade volumes dropped and many exchanges innovated to a peer-to-peer model.

This ban is still in force and we regularly hear reports of bank account closures for those trading even in the peer-to-peer markets.

IAMAI Case

Internet and Mobile Association of India (IAMAI), an industry body challenged this RBI circular by filing a case against the RBI circular calling it “arbitrary, unfair and unconstitutional”. As the case progressed, the Supreme Court of India asked RBI for justification. In June 2018, it was clear before the court and the public that the RBI had no research backing the ban on cryptocurrencies. Soon after that, Indian Securities Exchange Board (SEBI) sent a team abroad to study cryptocurrencies and Initial Coin Offerings (ICOs). This case has been heard, and the Supreme Court asked RBI to provide a point by point reply to the IAMAI.

Nasscom, the leading Indian body for technology startups, released a statement urging RBI to give a second thought to crypto in May 2019.

On November 18, the case was adjourned to 14th January 2020.

‘Blockchain, not Bitcoin’ narrative

After the withdrawal of banking support, Indian government has still been bullish on blockchain technology. The technology behind Bitcoin and many other cryptocurrencies became the hottest market for high paying jobs. Companies like IBM released their blockchain platforms.

So the Indian government went on this misleading path where Indian startups could use blockchain but not cryptocurrencies. This is fundamentally impossible because cryptocurrencies provide the essential incentive model to sustain a decentralized blockchain.

Indian startups could use blockchain but not cryptocurrencies

Cryptocurrency Draft Bill

Indian government formed an inter-ministerial committee to propose a bill to regulate cryptocurrencies. The Garg Committee did little research and proposed a shocking bill. Proposing 10 years jail for holding, mining or trading in cryptocurrencies, this bill was first leaked, then confirmed by the Garg Committee. Subhash Chandra Garg was later transferred to the power ministry. The bill also explored the possibility of Digital Rupee, India’s official cryptocurrency.

The draft bill needs to be tabled in the Indian parliament to become a law. As per the latest update, the bill will not be discussed in the winter session of the parliament starting on 18th November 2019.

Conclusion

Indian central bank and Garg Committee’s reports and comments have been shredded to pieces by the crypto community, lawyers and experts globally. Just because an asset can be used for illegal trade does not mean it should be banned. The Indian crypto community has been calling for fair regulations since the RBI banking ban without avail. As developed countries like the US and India’s comparative Asian power China move to regulate cryptocurrencies instead of banning them, the Indian government will have no choice left but to focus on fair regulation. It is just a matter of time.

As the fight for crypto extends at multiple fronts, traders’ sentiments change and the volume reflects this positivity or negativity. When it gets difficult to get a comprehensive perspective of investor sentiment, CryptoMood lets us keep a tab on market sentiment and plan our trades with greater certainty. Download CryptoMood on Android or iOS and don’t forget to join our growing Telegram community!

Written by Amrit Mirchandani