India’s finance minister Nirmala Sitharaman completely ignored cryptocurrencies in her almost two-hour-long budget speech yesterday (Feb. 1). But instead of feeling left out, the country’s digital currency ecosystem is breathing a sigh of relief.
The sense of respite comes because the Indian government is currently mulling a ban on cryptocurrencies, which some were anticipating might be announced as part of the budget.
According to the Lok Sabha (lower house of parliament) bulletin last week, the Modi government plans to introduce a bill prohibiting all private cryptocurrencies in India and creating an official digital currency issued by the Reserve Bank of India (RBI).
“Cryptocurrencies are related to finance and the fact that they were not mentioned in the budget shows that the government isn’t in a hurry to make a decision. Also, I don’t think the government will pass a bill without considering stakeholders’ views,” said Nischal Shetty, founder of India’s most popular cryptocurrency exchange WazirX.
Uncertainty over cryptocurrency in India
Cryptocurrencies have been gaining traction in India over the recent months as many Indians see them as an alternative to buying gold. Trade volumes at several crypto exchanges in the country have been rising.
Given this new found love, ahead of the budget, #IndiaWantsCrypto was trending on Twitter.
But expectations that the budget would ban cryptocurrencies did cause jitters in the market. “Last week the price of bitcoin had dropped by 8-9%,” said Shetty. “But following the budget, it has recovered on our exchange.” This is in contrast to the global scenario where the price of bitcoin surged on Jan. 29 after Tesla chief Elon Musk, one of the richest men in the world, added #Bitcoin to his Twitter bio and said he was a supporter.
Indian investors’ reaction isn’t unfounded because the country has a history of cracking down on cryptocurrencies. In 2018, the RBI had asked all banks in the country to cut ties with entities dealing in cryptocurrency, which wreaked havoc for the ecosystem with many exchanges shutting shop. The matter took nearly two years and an intense court battle to get resolved.