Investing in unregulated digital assets, notably, Bitcoin, has shown a startling rising trend since 2020, despite uncertainties surrounding its future in India. According to data from a number of domestic cryptocurrency exchanges, between 1.5 and 2 crore Indians have made investments in the asset class, which reached the $10 billion milestone in November of this year. The rise in cryptocurrency use points to a paradigm shift in the nation, which is recognized for investing more frequently in gold and other secure assets. Let’s take a look at the virtual asset’s history before the much-anticipated Cryptocurrency and Regulation of Official Digital Currency Bill is introduced.
Launch of cryptocurrencies in 2008
A paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” by a developer going by the alias Satoshi Nakamoto was published in 2008, marking the beginning of the cryptocurrency adventure.
2010: Initial cryptocurrency sale
Two years later, 10,000 Bitcoin were exchanged for two pizzas to mark the first Bitcoin transaction. For the first time, this gave cryptocurrencies a monetary worth. The digital asset soon gained popularity as other cryptocurrencies like Litecoin, Namecoin, and Swiftcoin started to appear.
2013 saw the release of the first cryptocurrency-related RBI circular.
The Reserve Bank of India (RBI) released a circular in 2013 alerting consumers to the possible security-related dangers associated with the usage of virtual currencies as crypto investments increased in India as well and exchanges like Zebpay, Pocket Bits, Coinsecure, Koinex, and Unocoin started to emerge.
2016–2018: Demonetisation and the RBI’s Crypto Ban
The experiment with demonetisation increased the inclination for digital payments, which unintentionally boosted cryptocurrency investments by attracting tech-savvy clients to the virtual asset. As long as Indian banks were still allowing transactions on cryptocurrency exchanges, the RBI would issue another circular in 2017 to express its concerns about virtual currency. Finally, by the end of 2017, the RBI and the finance ministry issued a warning stating clearly that virtual currencies are not a form of legal tender.
The Central Board of Digital Tax (CBDT) presented the finance ministry with a draft plan to outlaw virtual currencies in March 2018. About a month later, the RBI issued a circular prohibiting banks, NBFCs, and payment system providers from working with virtual currencies and offering their services to virtual currency exchanges. As a result, trade volumes on cryptocurrency exchanges collapsed by 99%.
#IndiaWantsCrypto in November 2018
Nischal Shetty, the founder of WazirX, launched the #IndiaWantsCrypto campaign on November 1st, 2018, 10 years after Nakamoto’s article called for the favorable regulation of cryptocurrencies in India. The campaign’s initial impact came when Rajeev Chandrashekhar, a current Rajya Sabha MP, responded favorably to it. Later on, famous people like DJ Nikhil Chinapa, Sathvik Vishwanath of Unocoin, Jayanti Kanani, the co-founder of Polygon, and Anthony Pompliano joined the campaign. The campaign has benefited greatly from Nischal’s persistent tweets, and the hashtag even trended on Twitter during the budget session in February when the crypto law was introduced. In July 2021, #IndiaWantsCrypto reached 1000 days and is still continuing strong because of Nischal’s tweets and the participation of thousands of other crypto fans.
March 2020: The Supreme Court overturns the ban on cryptocurrency banking
The RBI circular’s prohibition, which was a major setback, prompted cryptocurrency exchanges to file a writ case with the Supreme Court, which led to the ban’s eventual repeal and the ruling that the RBI circular was illegal.
As a result, cryptocurrency exchanges started up again, and the SC decision arrived just in time for the crypto bubble.
2021: Publication of the Crypto Bill
But the fight for cryptocurrencies in India was far from over. The Indian government declared on January 29, 2021, that it will draft a bill to establish a sovereign digital currency and then outright outlaw private cryptocurrencies. The Standing Committee on Finance came to the conclusion that cryptocurrencies should be regulated rather than outlawed after meeting with the Blockchain and Crypto Assets Council (BACC) and other cryptocurrency stakeholders in November 2021. Prime Minister Narendra Modi also presided over a discussion on cryptocurrency with senior officials at the start of December 2021.
According to the existing signs, India will implement a strict regulatory framework to deal with cryptocurrencies. The choice of which regulatory agency will handle the problem needs to be made. The government would probably classify cryptocurrency as an asset class rather than a form of money. According to experts, rules will increase the accountability and openness of crypto trading platforms. To stop fraud and keep track of international transactions, checks, and balances may also be implemented. Despite the lack of clarity surrounding the future of the unregulated digital asset, the adoption of cryptocurrencies has accelerated significantly over the past two years, with India now serving as the largest investor. It would be interesting to observe where India’s cryptocurrency adventure goes when the legislative bill is passed.