India dodges bullet over global crypto meltdown
NEW DELHI: Cryptocurrency markets worldwide have been battered with billions of dollars being wiped out but India managed to stay relatively unscathed thanks to a cautious approach of the government and the Reserve Bank of India (RBI).
While the RBI has refused to recognise cryptocurrencies and repeatedly issued warnings against trading in them, the government fired the tax bullet to wean off demand.
Net result - Indian investors have been largely spared from the crypto meltdown that has taken the total market value of cryptocurrencies below $1 trillion in just a year from $3 trillion in 2021 and sent Bahamasbased crypto exchange FTX into bankruptcy after a rush of customer withdrawals.
The collapse of FTX empire, which has wiped out the entire $16 billion fortune of co-founder Sam Bankman-Fried - one of history’s greatest-ever destructions
of wealth, has shaken confidence in the already troubled industry that was struggling to gain mainstream credibility. The prices of the leading cryptocurrencies, Bitcoin and Ether, have plummeted.
In India, the Reserve Bank of India has been resolutely opposing virtual currency from day one while the government initially was toying with the idea of regulating such instruments by bringing a law.
However, the government
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after a lot of deliberation came to the conclusion that global consensus is required in respect of virtual currencies as these are borderless and risks involved are far too high.
According to the RBI, cryptocurrencies have specifically been developed to bypass the regulated financial system and this should be reason enough to treat them with caution.
Industry estimates put exposure of Indian investors to crypto assets at only 3%.
Despite the global meltdown, India-focused cryptocurrency companies are not ringing the alarm yet. India’s largest crypto exchanges WazirX and ZebPay continue operations.
“Who are the heroes? The Government of India, SEBI, RBI, etc to call the BS. If Indian entities like brokers got into crypto, imagine how many would have lost money.
Even without this, around 3% Indians own crypto.
“Tailpiece: This may not be over. Please do not buy this dip,” tweeted Abid Hassan CEO of Sensibull.com, India’s largest options platform.
According to Association of National Exchanges Members of India (ANMI) president, Kamlesh Shah, steps taken by the RBI and government not to give recognition to cryptocurrency is appropriate at this point in time.
India is yet to see savings getting channelised into investment in a meaningful way to serve economic growth, Shah said.
Describing cryptocurrencies as “clear danger”, Reserve Bank Governor Shaktikanta Das in the Financial Stability Report released in June had said that anything that derives valuebased on make-believe, without any underlying, is just speculation under a sophisticated name.
Finance Minister Nirmala Sitharaman has reiterated the stance of the RBI to ban cryptocurrencies but said that no legislation is possible without significant international collaboration.
Sitharaman in a written reply to Parliament recently said RBI is of the view that cryptocurrencies should be prohibited.
Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage, she had said.
“Therefore any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards,” she had said.