With Cryptocurrency Bill in offing, experts list options for worst case scenario

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Amid the ongoing debate to regulate cryptocurrency in India, a shadow of fear and uncertainty looms large over India’s crypto ecosystem, as the government has indicated it is likely to table the Cryptocurrency Bill in the Winter Session. 

India today has over 10 crore cryptocurrency investors, who have collectively poured in over $10 billion dollars, according to broker discovery and comparison platform BrokerChooser. The prices of a number of cryptocurrencies, especially Bitcoin, have been soaring. At present, the value of 1 Bitcoin stands at Rs 44.92 lakh. However, it is important to note that India currently has no law to regulate cryptocurrency. But there is also nothing that says dealing in the same is illegal. 

If the proposed Bill deems cryptocurrencies illegal tender, it will stop investors from trading in any crypto class.

Ban will hit prices

“The existing traders and investors will have to book losses, opening the floodgates for huge financial claims and disputes. All of this, will eventually lead to legal recourse with numerous court cases because of the huge investments already made, with a couple of court rulings already having been passed on the subject matter,” said Professor Padmanabha Ramanujam, Dean at IFIM Law School and a cryptocurrency expert.

But the cryptocurrencies are global and will not be affected by any particular country taking a decision. Shivam Thakral, CEO of BuyUcoin, a homegrown cryptocurrency exchange, told indianexpress.com, that the global crypto market is “…too big to be banned and regulators are expected to respect people’s choices allowing them to choose their investment products.” India’s crypto investments have crossed the $10 billion mark which reflects the mood of institutional and retail investors.

Any ban on cryptocurrency trading or holding would be a massive setback to the ecosystem of startups that have bloomed in India recently.  

“A quick search on LinkedIn with the keyword ‘cryptocurrency’ shows more than 10,000 job listings in India. Apart from these new vacancies, there are several thousands of people currently employed in this sector. Banning cryptocurrencies would be a regressive step for any government,” asserted Edul Patel, CEO and co-founder of Mudrex, a global crypto investment platform.

When China’s top regulators banned crypto trading, there was an immediate change in coin prices, wiping at least $400 billion off the market. This is because China is one of the largest cryptocurrency markets. 

However, India’s share in the trading business is much smaller compared to China. Ramanujam believes the crackdown will not dent cryptocurrency prices, as long as the global companies continue to adopt crypto related products and services.

Interestingly, crypto exchanges did not witness any significant dip in trading activity during the 2017 ban by the Reserve Bank of India (RBI). “The coin prices are not affected by the decision taken by any particular country as crypto assets are decentralized in nature,” noted Thakral. 

Any ban by the Indian government would impact India-based cryptocurrency exchanges and platforms. However, the prices of the coins would not gain or lose any movement.

Investments will be stuck 

When a ban is imposed it means that the transactions between the bank and your crypto exchanges will be completely stopped. Users will not be able to convert local currency to buy any kind of cryptocurrency or be able to liquidate existing investment.

But, Ramanujam said investors will still be able to find buyers where cryptocurrency is still legal. “…while leveraging is still possible, the transaction costs of liquidating crypto coins would be much higher in that scenario.” 

Thakral pointed out that investors will be free to withdraw their funds in every situation by following the policies and procedures of the platform they are trading on.

“In the case of a blanket ban, there will be a time period given to all investors to withdraw the funds. During this period, investors would be able to sell off their holdings as usual,” Patel added.

Disclaimer: Cryptocurrency is an unregulated space and digital currencies are not backed by any sovereign authority. Investing in cryptocurrency comes with market risks. This article does not claim to provide any kind of financial advice for trading or buying cryptocurrency.