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Govt finds cryptocurrency ban unfeasible due to large crypto investments by Indians: Report

Such a ban may no longer be a realistic option for the government thanks to the scale of crypto trading in India.

“A middle path that balances the concerns of all stakeholders is more likely,” a government source told the Economic Times on the possibility of the Indian government banning cryptocurrencies. Considering that Indians have made large investments in crypto assets, an outright ban is unfeasible, the source added.

MediaNama reached out to the Ministry of Finance to confirm the development but did not receive a response. Finance Minister Nirmala Sitharaman had announced in August that the crypto bill is currently awaiting approval from the cabinet, not divulging any further details.

At an estimated 2 crore crypto investors, India has one of the highest numbers of cryptocurrency owners. The government has considered a ban in the past, but the rapid adoption of cryptocurrencies in India might mean that such a ban is no longer a realistic option for the government.

What’s the scale of crypto trading in India?

As the government moves forward on regulating cryptocurrencies, they are rapidly growing in popularity among Indian investors:

  • 2 crore users: India has over 2 crore cryptocurrency investors, according to a conservative estimate by the founder of WazirX, India’s largest crypto exchange.

  • Rapid growth: WazirX recently reported an increase of 2648% in user sign-ups from tier-II and tier-III cities like Ahmedabad, Lucknow, Ranchi, Imphal, and Mohali among others.

Cryptocurrency regulation in India: A timeline

India’s much-anticipated crypto bill is currently tabled before the Union Cabinet awaiting approval. Here’s a timeline of everything that’s happened till now around crypto regulation in India:

  • 2018: The Reserve Bank of India banned regulated entities including banks from providing services to crypto exchanges. It said that cryptocurrencies raise concerns of “consumer protection, market integrity, and money laundering, among others”.
  • 2019: A report by the Finance Ministry (drafted in 2017) advocated for a ban on the use of cryptocurrency in India. The report was drafted by an inter-ministerial committee chaired by the secretary of the Department of Economic Affairs Subhash Chandra Garg.
  • 2020: The RBI ban was then overturned by the Supreme Court of India which said that the move was “disproportionate”. It led to a surge in sign-ups across various crypto exchanges as they were able to access banking services.
  • 2021: Finance Minister Nirmala Sitharaman announced that the crypto bill was tabled before the Cabinet awaiting approval, Mint reported in August.
  • 2021: The RBI is also working towards a “phased implementation strategy” for the introduction of central bank-backed digital currency (CBDC), giving regulators necessary powers of oversight and monitoring which cryptocurrencies lack.

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