India announced on Thursday that as the G20’s current president, it will prioritize the creation of a framework for international regulation of unbacked digital assets, stablecoins, and decentralized finance and will investigate the “possibility of their prohibition,” which could be a significant setback for the emerging sector.
At the beginning of this month, India assumed the Group 20 chairmanship for a year. 85% of the global GDP is represented by the group, which consists of 19 countries from different continents and the EU. It also invites countries like Singapore and Spain that are not members and international organizations like the World Bank and the IMF.
In a report released today, the Reserve Bank of India said that cryptocurrency assets are very volatile and have a lot in common with equities. This goes against what the industry says, which is that virtual digital assets are a different source of value because they help protect against inflation.
The Indian central bank sent out a warning, saying that governments around the world are worried that the cryptocurrency industry could become more connected to traditional finance and “take money away from traditional finance, which would have a bigger effect on the real economy.”
The Indian central bank is one of the most outspoken detractors of the cryptocurrency sector. The governor of the RBI, Shaktikanta Das, warned last week that private cryptocurrencies will cause the next financial crisis if they are not made illegal.
“Any so-called product’s value fluctuation is a function of the market.”But unlike any other asset or product, our main concern with crypto is that it doesn’t have any underlying structure. I think crypto, or private cryptocurrency, is a fashionable way of describing what is otherwise a 100% speculative activity,” he said at a conference.
Das said crypto owes its origins to the idea that it bypasses or breaks the existing financial system. “They don’t believe in the central bank; they don’t believe in a regulated financial world. “I’m yet to hear a good argument about what public purpose it serves,” he said, adding that he holds the view that cryptography should be prohibited.
India is one of the countries that has adopted a strict cryptocurrency policy. It started taxing virtual currencies earlier this year, charging a gain-based 30% tax and a transaction-based 1% deduction.
Due to the country’s move and the market crash, the number of transactions handled by local exchanges CoinSwitch Kuber and CoinDCX, which are backed by Sequoia India, Andreessen Horowitz, and Pantera, has dropped by a lot.
In a recent interview with TechCrunch, Changpeng “CZ” Zhao, founder and CEO of Binance, the largest cryptocurrency exchange in the world, stated that the company does not consider India to have a “particularly crypto-friendly climate.” He claimed that while the company is trying to communicate its concerns to the local government about local taxation, tax policies normally take a very long time to change.
“Binance travels to nations with pro-crypto and pro-business regulations. We don’t go to countries where we won’t be able to run a profitable business or any business at all,” he said.
Coinbase launched its cryptocurrency platform in the country earlier this year, but the service was quickly shut down because of concerns from regulators. Coinbase has funded both CoinDCX and CoinSwitch Kuber. Brian Armstrong, co-founder and CEO of Coinbase, stated in May that the company has blocked support for local payments infrastructure known as UPI “due to some informal pressure from the [central bank] Reserve Bank of India.”
India is the second-largest internet market worldwide, with more than 600 million connected consumers. The country, which has one of the largest startup ecosystems in the world, has drawn over $75 billion in investment over the past ten years from companies like Google, Meta, Amazon, Sequoia, Lightspeed, and Tiger Global.