Key Takeaways:
- Bitcoin and other cryptocurrencies are trading at a discount in India.
- Investors on some exchanges experienced issues.
- The government of India announced the introduction of a Bill in the parliament to prohibit all private cryptocurrencies in India.
- The bill did not define a private cryptocurrency.
Bitcoin and other cryptocurrencies are trading at a discount in India. As soon as the news of the cryptocurrency ban became public, all cryptos, including Bitcoin and Ethereum, dropped significantly, with the cryptocurrency losing nearly 25% of its value.
Following the announcement of the bill, the world’s most valuable crypto asset, bitcoin, fell to a low of 33,50,000 on WazirX, from a high of 46,35,371. According to Coingecko, a digital currency price and information data platform, the coin was trading at around 37,80,000 in India on Wednesday morning, compared to $56,638.67 or 42,15,928 in global markets.
On various other Indian crypto exchanges, the discount was over 15% last night and early this morning, but it appears to be narrowing now. Investors on some exchanges also experienced issues such as delays in accessing multiple functions, trading, and withdrawals as a result of frantic selling. Although no official data is available, industry estimates suggest that India has 15 million to 20 million crypto investors, with a total crypto market capitalization of around Rs 400 billion.
India’s stance on cryptocurrencies has been unpredictable, with the government seemingly sending out a different message every day. Prime Minister Narendra Modi recently chaired a meeting with senior government officials at which it was decided to regulate, rather than ban, digital assets.
The bill, titled ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021,’ did not define a ‘private cryptocurrency.’ Some speculate that this could mean coins like Monero and Dash, which focus on privacy. However, the general consensus is that all cryptocurrencies are private, with CBDCs being the only non-private digital currencies recognized by the government.
The government of India announced the introduction of a Bill in the parliament to prohibit all private cryptocurrencies in India, barring some exceptions to “promote the underlying technology of cryptocurrency and its uses”. The definition of private cryptocurrencies and the bill’s contents aren’t known yet.
Ajeet Khurana, founder of Genezis Network, a think tank for crypto startup investment said that “The panic stems from two lines of text in the description of the bill. If the bill indeed bans cryptocurrencies, it would be justified. But I don’t think it will do so, and panicking now would be a big mistake”.
Giving details of the bill, the notification said, “To create a facilitative framework for 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.”
According to the sources “A regulation mechanism will be in place so that crypto is not misused. The government is concerned about the underground transactions happening against cryptocurrency particularly its role in ‘hawala’ and terror funding. A strict mechanism will be in place so that law enforcement agencies can trace the origin of cryptocurrency used for illegal or anti-national work”.
CoinSwitch Kuber’s Nair said that “this is not the first time cryptocurrencies in India are trading at a discount. Prices dropped significantly in 2017, when late Arun Jaitley, then India’s finance minister, said that the government does not recognize bitcoin as legal tender”.
Cryptocurrencies are a group of decentralized digital currencies such as Bitcoin and Ethereum that are not regulated by any banking regulator. It is currently unregulated in India. It’s worth noting that the cryptocurrency bill is being introduced at a time when public interest in the subject is at an all-time high.
