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India joins the crypto regulation fold as second largest digital economy in the world

27.10.2021

The economic structure of India is a fascinating one to say the least.

A rapidly advancing fiscal and industrial nation with a middle class consisting of over 300 million people, and home to many quite simply massive global corporations.

It is also a nation whose domestic economy is so diverse that it features some of the largest publicly listed companies in all sectors from engineering to management consultancy, yet over 70% of the national population is unbanked and participate in a street-level, local cash and barter-based structure.

Therefore, naturally India is a very important nation for cryptocurrency and blockchain technology which has already gone a long way toward empowering tens of millions of entrepreneurial members of India’s ambitious younger generation.

In the past, India’s government has been sceptical with regard to the use of cryptocurrency and the participation in decentralized financial initiatives within the country, and has recently been caught between a rock and a hard place in terms of deciding between outright banning them or regulating the trading of virtual currencies.

Fortunately, the right decision has been made and India’s government has begun to move toward joining other major economies in realizing that the decentralized financial (DeFi) ecosystem is a mainstay of the future economy with finance minister Nirmala Sitharaman having publicly stated that a crypto bill is ready and it is awaiting a nod from the union cabinet before it can be tabled for discussion in the parliament.

Two months ago, Mr Sitharaman announced that a proposed set of regulations for cryptocurrency in India had been prepared and was awaiting approval from the Supreme Court before being presented to the lead government officials in parliament.

This is a critical step in the right direction as it means that cryptocurrency will very likely be embraced by the government via a regulatory framework, which signals the potential for sustainable growth within this crucial and large economic environment which will allow cryptocurrency and blockchain projects to flourish, something CoinMetro is a huge advocate of.

According to the latest update which was published in Indian mainstream media, the Indian government is looking to classify cryptocurrency as a commodity in terms of asset class and has also set up a panel to study how crypto income can be taxed, in a rather similar vein to US Securities and Exchange Commission head Gary Gensler who is currently working with the Senate Committee on similar legislation in North America.

These developments indicate the government is looking to regulate the cryptocurrency sector instead of quashing it, and industry experts remain optimistic.

In the meantime, India’s cryptocurrency adoption is soaring. India ranked second in Chainalysis’ Global Crypto Adoption Index for 2021. The country currently has 15 million retail crypto investors — although that is a small portion of the population, it is close to the number of income taxpayers in the country.

Echoing the efforts of the United States which is now looking to produce a full set of licensing credentials for cryptocurrency participants, and Estonia’s extremely forward-thinking view in which over 300 cryptocurrency entities have been licensed for quite some time now, many nations are beginning to get on board.

Two months ago, Banco de Portugal, Portugal’s central bank confirmed that it has issued licenses to two cryptocurrency exchanges for the first time since its new crypto trading law took effect, allowing them to now operate in Portugal, and in Britain, the Financial Conduct Authority (FCA) allocated even more resources toward assessing applications to the cryptoasset register.

Should India take this important step forward, it will be a game changer for the global digital economy. A nation of hundreds of millions of entrepreneurs will suddenly become part of a globally aligned world economic future, which will pave the way for all manner of transactions, contracts, investment and commercial business opportunities worth potentially billions of dollars.