Indian PM calls for cryptocurrencies to ’empower’ democracy at global summit

Narendra Modi also called for a global standard on cryptocurrencies and major social media platforms in an effort to facilitate free and fair elections and governance.

Cryptocurrency made an appearance at a global online summit for world leaders in a speech from Indian Prime Minister Narendra Modi.

At Friday’s events for the Summit for Democracy hosted by U.S. President Joe Biden, Modi said India would be willing to offer other countries “innovative digital solutions” to facilitate free and fair elections and governance. In addition, the Prime Minister called for a global standard on cryptocurrencies and major social media platforms, likely referring to the impact some have had on politics in India as well as many other countries:

“We must also jointly shape global norms for emerging technologies like social media and cryptocurrencies so that they are used to empower democracy, not to undermine it […] By working together, democracies can meet the aspirations of our citizens.”

Indian Prime Minister Narendra Modi speaking at Friday’s Summit for Democracy

As the Prime Minister of India, Modi represented roughly 1.4 billion people at the summit, the largest democracy in the world by a large margin. His remarks came as the Indian government prepares to consider a bill that could ban certain cryptocurrencies, but also encourage the creation of a digital rupee. 

Different reports have suggested that the legislation is aimed at regulating crypto rather than banning it. The same bill has previously appeared on the Indian parliament’s agenda but has not yet led to a vote. The Reserve Bank of India also had a blanket ban on crypto on the books until March 2020, when the country’s supreme court overturned it.

Related: Lines in the sand: US Congress is bringing partisan politics to crypto

Despite the lack of regulatory clarity in India, Modi has called on countries to work together on crypto and blockchain and urged others to consider the ethics when using the technology. The next general election in India is expected to occur in 2024 when citizens will choose new members for the country’s lower house of parliament.

“It is important that all democratic nations work together on [crypto] and ensure it does not end up in wrong hands, which can spoil our youth,” said the PM in a Nov. 17 tweet.

Indian trade group recommends ‘special class security’ status for crypto

The Confederation of Indian Industries has proposed new regulations around the nascent crypto market.

The Confederation of Indian Industries (CII), a non-government trade association and advocacy group, has proposed to treat cryptocurrencies as securities of a special class. 

The trade association released a report titled “Cryptocurrencies, Crypto Tokens/Assets & Regulations: The Way Forward” where it advocates for regulating the crypto market instead of outlawing it, reported Business Line. The report highlighted substantial technological innovation that the core technology of blockchain can bring in the payment and remittance sector.

The report proposes to formulate new regulations around the nascent crypto market instead of regulating them under existing securities law.

“A new set of regulations appropriate to the context of crypto/digital currencies and their jurisdiction-less, decentralized character, should be evolved and applied. This would mean regulatory focus principally on dealings and custody, rather than on issuance (except where issuance entails an Initial Coin Offering (ICO) to the public by an issuer established in India),” said the official report.

The CII report recommended bringing cryptocurrencies under the special provision of income tax and GST laws, under which it can be treated as an asset class for tax purposes unless specifically treated as “stock in trade“ by a participant. 

Related: Smart crypto policy could keep India’s tech dominance on top

The report recommended imposing strict Know Your Customer and Anti-Money Laundering requirements for centralized exchanges to ensure investor protection. Further, these exchanges must register with the Securities and Exchange Board of India (SEBI) to obtain a financial markets intermediaries license. It also recommended setting a minimum capital and guarantee fund requirement for exchanges while complying with investor disclosure requirements.

The CII report comes at a crucial juncture as a draft of a cryptocurrency bill is currently up for discussion in parliament. The Indian finance minister had earlier assured that the government would not take a ban approach and rather regulate cryptocurrencies as an asset. 

Indian CoinDCX crypto exchange to go global in 2022, says exec

After announcing Cosmex in February 2021, CoinDCX is now testing its global product to launch in 2022.

Ongoing uncertainty around cryptocurrency regulation in India isn’t stopping domestic crypto companies from launching global offerings.

Indian cryptocurrency exchange CoinDCX is preparing to move forward with its global crypto-to-crypto trading platform — dubbed Cosmex — in 2022, according to a senior executive at the company.

Ramalingam Subramanian, head of brand, marketing and communications at CoinDCX, told Cointelegraph that CoinDCX has significant ambitions regarding the exchange’s global expansion as its upcoming platform will target a global audience.

The firm initially announced the development of Cosmex in February 2021, planning to expand CoinDCX’s footprint to the global markets amid the increasing global demand and acceptance for cryptocurrencies.

According to Subramanian, the launch of Cosmex is coming “most likely next year” and will initially launch in Western Europe and Southeast Asia.

Cosmex “has nothing to do specifically with what’s happening in India,” Subramanian stressed, adding that the platform rather seeks to respond to the “huge demand” for crypto services outside of India. He added that CoinDCX is not willing to add to speculation around regulatory uncertainty in India by discussing scenarios where Indian regulators take a tougher stance on the industry.

Related: India’s crypto unicorn CoinDCX has no immediate plans for IPO

Subramanian noted that CoinDCX’s main platform is “focused on India generally” and has restrictions for certain countries.

After lifting a major ban on crypto services in 2020, Indian authorities have been reportedly considering other restrictions for the industry. However, experts are confident that the Indian government would most likely choose to regulate rather than ban its growing crypto economy.

India to Impose Ban on Crypto Payments, Deadline for Declaring Crypto Assets, KYC Rules: Report

India to Impose Ban on Crypto Payments, Deadline for Declaring Crypto Assets, KYC Rules: Report

The Indian government has reportedly proposed banning the use of cryptocurrency for payments and setting a deadline for investors to declare their crypto holdings. Violators may be arrested without a warrant and held without bail. In addition, the crypto bill may call for a uniform know-your-customer (KYC) process for all crypto exchanges.

Proposed Rules in Indian Crypto Bill

As a cryptocurrency bill awaits to be taken up in parliament in India, several reports have emerged about what’s in the bill, which the government has not made public.

While crypto assets will reportedly be regulated, the Indian government is planning to ban the use of cryptocurrency for payments, Reuters reported Tuesday, citing an unnamed source and a summary of the bill it has seen.

The proposed legislation also states that the rules will be “cognizable.” Violators may be arrested without a warrant and held without bail, the news outlet detailed, quoting the summary of the bill:

The Indian government is planning a ‘general prohibition on all activities by any individual on mining, generating, holding, selling, (or) dealing’ in digital currencies as a ‘medium of exchange, store of value and a unit of account.’

While cryptocurrency will not be legal tender in India, like it is in El Salvador, the proposed crypto legislation will give it legal status.

According to the source, self-custodial wallets will likely be banned. However, this may prove to be difficult as explained by the CEO of a major Indian cryptocurrency exchange. He recently described what he expects regarding self-custodial wallets and the new crypto legislation.

The Indian government is also planning to set a deadline to allow investors to declare their cryptocurrencies and comply with the new rules, Bloomberg reported Tuesday, citing people familiar with the matter.

Moreover, The Economic Times reported Wednesday that the proposed cryptocurrency legislation will require crypto exchanges to share their know-your-customer (KYC) data with regulators and government agencies, including the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the income tax department.

The crypto bill will also call for a uniform KYC process for all crypto exchanges, the news outlet added, noting that exchange platforms currently have their own procedures.

Regarding crypto taxation, the government is planning to add cryptocurrency to Section 26A of the Income Tax Act in the upcoming budget, the publication conveyed, noting that this will “necessitate taxpayers to reveal their cryptocurrency investments both in India and abroad.”

Last week, NDTV reported that it has seen the government’s cabinet note which names SEBI as the regulator overseeing crypto activities in the country. In addition, Indian Finance Minister Nirmala Sitharaman confirmed last week that the crypto bill has been reworked from its original version which seeks to ban all cryptocurrencies, including bitcoin and ether. She also answered several parliamentary questions regarding the proposed cryptocurrency regulation.

What do you think about the crypto regulation India has reportedly proposed? Let us know in the comments section below.

India to set maximum penalty for violating crypto norms at fine of $2.7 million or 1.5 years in jail

The country wishes to see all crypto activities take place on platforms regulated by SEBI.

On Tuesday, BloombergQuint (Bloomberg India) reported that the penalty for non-compliance with the Indian government’s crypto policies could range from a maximum fine of 20 crore rupees ($2.7 million dollars) or 1.5 years in jail. Prime Minister Narendra Modi will likely give cryptocurrency investors a deadline to comply with new rules and declare their assets. While the regulatory environment in the country holds a high degree of uncertainty, reports have indicated that investors’ crypto must soon be held in exchanges operating under the oversight of the Securities and Exchange Board of India, or SEBI.

This would mean that private wallets would not be legal under the proposed legislation, and investors who use them could be subjected to the aforementioned judicial penalties. In addition, Modi’s government plans to institute a minimum capital threshold for investing in cryptocurrencies.

India is taking a hard-line stance against crypto due, in part, to the perceived rise in fraud, money laundering and terrorist financing in recent years. Another element, however, is that the competition from privately-owned or privately-issued cryptocurrencies would, in theory, threaten the Reserve Bank of India’s plans to launch a digital rupee. The official text from an ongoing controversial crypto bill in the country is as follows:

“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.”

Smart crypto policy could keep India’s tech dominance on top

Experts are fairly confident that the Indian government will most likely choose to regulate rather than ban its thriving crypto economy.

There’s no denying that the Indian government shares a contentious relationship with cryptocurrencies, as was made clear recently when the government indicated that it plans on banning all private cryptocurrencies — a list that could potentially include just about every digital asset in the market today — after it had previously lifted all such restrictions back in 2019.

To elaborate, it is expected that as the government reconvenes for its Winter Session, it will discuss the Cryptocurrency and Regulation of Official Digital Currency Bill 2021, which as the name suggests, seeks to create a legislative framework wherein all private cryptocurrencies can potentially be banned. 

That said, there is still a lot of confusion regarding what the term private crypto constitutes, with some people speculating that it may refer simply to security-centric tokens such as Monero (XMR) or ZCash (ZEC). On the other hand, Naimish Sanghvi, founder of crypto news website Coin Crunch India, thinks that the Indian government’s definition of a private asset could expand to include pretty much every crypto in the market, stating:

“In the 2019 Department of Economic Affairs report on cryptocurrency, they essentially said that everything that is non-sovereign is designated as a private cryptocurrency. And by that logic, it means that Bitcoin and Ethereum will come into that definition.”

Blurred lines galore

Nischal Shetty, CEO of Indian cryptocurrency exchange WazirX, told Cointelegraph that it is hard to comprehend what the government means by private cryptocurrencies, especially since prominent assets like Bitcoin (BTC) and Ether (ETH) are essentially public cryptos that have been built atop transparent blockchain infrastructures — with each project featuring its very own set of specific use cases. 

Shetty further highlighted that people cannot use the Indian rupee or Tether (USDT) to pay for fees on the Bitcoin or Ether blockchains. Instead, they need crypto to use decentralized applications (DApps) and create nonfungible tokens (NFTs). He said:

“While the description of the draft bill appears to be the same as in January 2021, several noteworthy events have occurred since January. First, the Parliamentary Standing Committee invited a public consultation, and then our Prime Minister himself came forward to call for crypto regulations in India.”

Sumit Gupta, CEO of cryptocurrency trading platform CoinDCX, told Cointelegraph that there is no official label for a private cryptocurrency anywhere else in the world — and so now, the public eagerly awaits the Indian government’s definition of a private asset.

He further pointed out that since the full details of the bill are not yet available, it is best not to speculate about what it may potentially entail. However, one thing that is clear is that the government recognizes the transformative potential of blockchain, and is paying closer attention to its various uses and applications in our everyday lives. Gupta noted:

“A complete ban is unlikely as it will challenge India’s ability to harness blockchain technology to transform our industries — an outcome we believe policymakers would rather avoid. Crypto is a powerful trend that is shaping economies around the world, and we remain confident that our policymakers will formulate regulations that will enable our economy to reap the full benefits the global crypto industry has to offer.”

A blanket ban looming on the horizon?

When asked about the possibility of an all-out ban rearing its ugly head once again, Shetty noted that it is best to wait and find out more about the bill. He did admit that he is optimistic about India’s general outlook towards crypto, citing Finance Minister Nirmala Setharaman’s recent comments wherein she noted that India may only look to “regulate its digital asset sector” rather than stifle all of the innovation emanating from it irrevocably.

Shetty alluded to the comprehensive Financial Action Task Force (FATF) guidelines that were proposed at this year’s G20 summit which stated that crypto is not a threat to the local economy of any country, adding:

“A blanket ban will also lead to an increase in OTC markets, fake exchanges and brain drain from India. The crypto industry today directly/indirectly employs 50,000 people today and generates millions in tax revenue for the government. The crypto industry is open to being regulated, but a blanket ban is something that will harm the entire country’s financial and technology ecosystem.”

Similarly, Gupta is willing to welcome any bill, as it assures that policymakers are beginning to acknowledge the importance of this new asset class, as well as the growing appetite from retail and institutional investors in India. “While we will not speculate as to the full details of the bill, we are confident that the government will act in a manner that best positions our economy for inclusive growth,” he added. 

In his view, a balanced approach between innovation and regulation should ideally be maintained, with the government clearly spelling out the specific parameters critical in transacting with crypto without overly stifling the technology’s potential.

Regulation rather than an all-out ban 

Recent reports from local Indian media outlets claim that an outright ban may not be in offing. Rather, the government may devise a well-crafted governance framework with how digital assets can be administered in the region. 

News media organization NDTV revealed that it had been able to get its hands on a “cabinet note” related to the proposed crypto bill. As per the document, there are only suggestions to regulate cryptocurrencies as assets that are overseen by the Securities and Exchange Board of India (SEBI) rather than outlawing the market completely. Not only that, the note reportedly specifies that investors will be given a set amount of time in order to declare their crypto holdings as well store them in platforms that are regulated by the SEBI — a move that suggests private wallet operators may be banned completely from operating within the region. 

Lastly, the document suggests that the upcoming crypto laws will not allow for any digital assets to be recognized as legal tender. However, the government may consider the creation of its very own central bank digital currency somewhere down the line.

Policymaking and India’s digital dominance

As things stand, India boasts of a vibrant tech and innovation sector that hosts the third-largest startup ecosystem in the world. In this regard, Gupta noted that investor confidence in the country has only continued to grow recently, with Indian crypto companies amassing over $500 million worth of funding investment over the course of 2021 alone. 

Furthermore, foreign direct investment in the sector is also estimated to grow to over $25 billion by 2025 and is likely to cross $200 billion by 2030. In this regard, he added: 

“Just recently, Singaporean crypto exchange Coinstore entered the Indian market despite the looming regulatory uncertainty, signifying India’s strength as a crypto hub that continues to attract international companies. If a blanket ban does come into effect, it will not only affect access and adoption-related to digital finance for consumers but also limit innovation and technological advancements for the wider economy.”

India is historically known as a tech hub and by embracing the future of finance, it can further its economic and technological standing as a global powerhouse. Therefore, it will be interesting to see how the country decides to finally go ahead and regulate its burgeoning digital asset market.