It may be too early for cryptocurrency players in India to be panicking, as they are now, over a possible ban on virtual tokens.
Prices of major cryptocurrencies have fallen significantly—bitcoin by 17%, ethereum 15%, and tether by almost 18% since yesterday (Nov. 23).
This is in reaction to the Lok Sabha bulletin (pdf), released on Nov. 23 that said the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, will be presented in the winter session of parliament starting Nov. 29. The draft bill proposes proscribing private cryptocurrencies in India, but “allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Their average price is now at around a 15% discount compared to global rates, according to Nischal Shetty, founder and CEO of one of India’s major cryptocurrency exchanges, WazirX.
While the bill’s fine print is yet unknown, experts believe the panic selling of cryptocurrencies is partly reflective of their increased popularity since January when the draft bill was first announced.
Industry estimates suggest there are nearly 20 million crypto investors in the country, with total crypto holdings of around 40,000 crore rupees ($5.39 billion). First-time investors, including ones from tier-2 and -3 cities, constitute a considerable part of India’s cryptocurrency ecosystem and they are now alarmed, Shetty said.
“Since the description (of the bill) is the same as January 2021, there is a lot of panic in the market…right now everyone’s pre-empting,” said Shetty.
The description in the Lok Sabha bulletin, the same as it was in the earlier version issued in January, says:
“To create a facilitative framework for the 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.”
This implies that all private cryptocurrencies like bitcoin, ethereum, tether, and ripple will be banned. Such a move would force cryptocurrency exchanges to shut down in India.
Experts, however, suggest investors take this draft bill with a pinch of salt since the government has shown that it was rethinking the matter since this description was first used.
On Nov. 15, India’s parliamentary standing committee on finance came to the conclusion that cryptocurrencies cannot be stopped, though they have to be regulated.
“…there is broad agreement on ensuring customers are protected, financial system stability is reinforced and India is able to take advantage of the crypto technology revolution,” said Ashish Singhal, founder of another cryptocurrency trading platform CoinSwitch Kuber.
The cryptocurrency industry is hopeful that the government will involve stakeholders while drafting the bill, he said.
A query sent out to the Ministry of Finance went unanswered.