Recently, there has been a bombardment of advertisements around cryptocurrencies in newspapers and on billboards and digital media. The advertisements explicitly tap into the feeling of 'Fear Of Missing Out' or 'FOMO', promising outrageous (1,000x) returns and creation of wealth overnight, even for a first-time investor. Is this the reality? Keep in mind the volatility of this space - a single tweet from Elon Musk can bring down the value of Bitcoin, one among many currencies that are traded. But a naive investor, or any person wanting to create quick wealth, would definitely want a part of this based on the publicity, even it means entering a market space that is unregulated and ungoverned.
The Parliamentary Standing Committee on Finance had a detailed discussion with stakeholders on Monday and the Prime Minister then reviewed the matter alongside the Finance Minister and RBI, so there finally seems a ray of hope that some structure will be brought into this unregulated space. How will a structure help India rather than a ban? It will create a safeguard for retail investors, the crypto companies based in India will not move out of India, so there will be no flight of capital, it will create a healthy ecosystem for India and Indians to explore emerging technologies and become leaders and innovators in this space.
Bitcoin, Ethereum, Dogecoin, etc. are a few of the names that have become popular utterances these days, specially among the youth. When we say bombardment of ads, just to cite the recently-held World Cup T20, there were 51 cryptocurrency-related ads per match for an ad spend of 50 crores, 10 hours of ads most targeted at young investors. This sort of blitz and glitz is bound to raise regulatory and governance concerns without a policy framework for the sector.
The three-trillion-dollar market has attracted investors from all around the world, especially retail investors. India is one of many countries which has not taken any clear stand on it. The Supreme Court in early 2020 had cancelled the RBI circular banning cryptocurrencies. Since then, there has been talk that the government will introduce legislation on cryptocurrency but nothing concrete has been done due to India's conservative approach. Which is only fair, considering the uncertainty of the space. It places around 15 million active subscribers on various cryptocurrency exchanges without a safety net. The lack of awareness, transparency and clarity puts the money of the investors, most importantly, retail investors, at risk. This industry which holds so much of capital is not monitored or regulated in India and that should be the point from where India's policy-making should begin.
As the popular saying goes, "You can love it or hate it, but you cannot ignore it". According to industry estimates, the value across various crypto currency exchanges is pegged at an overwhelming 6 billion dollars, a number too humongous to look the other way for the government, considering the huge economic impact it can have if it remains unregulated.
India cannot and should not exclude itself from a three-trillion-dollar market. A ban will only create an underground parallel economy, encouraging illegitimate use and will defeat the very purpose of the ban. Most importantly, it will also contradict the Draft National Strategy on Block Chain, 2021 of the Ministry of Electronics and IT (MEITY), which hailed block chain technology as transparent, secure and efficient in putting a layer of trust over the internet. One cannot promote blockchain which is one part of the technology-driven innovation while stifling its ancillary, crypto assets instead of currency, if you may.
A regulatory framework will address the two key concerns associated with it - lack of transparency and unwarranted advertisements promoting risky behaviour. Regulation will protect investors and enable informed investments. Most importantly, regulation can aid in monitoring the money-laundering and terror-financing issues and also prevent scams (the recent Bengaluru hacking case, Squid Game currency scam, etc.). An efficient regulatory framework will provide accountability as also a grievance redressal mechanism for investors.
The US has been in favour of allowing all cryptocurrencies, Japan has permitted them, Singapore and Dubai seem to be the favourite for most, China has issued a blanket ban on all cryptocurrency transactions and mining, whereas the verdict in India is yet to come. It becomes imperative for the government to bring forward a legislation that understands the vision of the technology, takes into account the inputs of all stakeholders, and enables citizens to enjoy the benefits that entail with this new-age technology.
As the winter session of parliament approaches, everyone is watching and hoping that the government will introduce legislation that addresses and resolves the concerns of the stakeholders and regulates the growing market of cryptocurrencies. Till then, stakeholders, especially crypto-investors should HODL (Hold On For Dear Life).
(Priyanka Chaturvedi is Member of Rajya Sabha and Deputy Leader Shiv Sena.)
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