Crypto Investors Panic As India Plans To Bar Private Cryptocurrencies

The government will introduce Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the winter session of Parliament

Mumbai: The crypto exchanges in India have requested the investors not to get into panic selling after investors started selling cryptocurrencies, leading some of the leading exchanges to crash.

Crypto markets crashed following news of the central government introducing a Bill in Parliament to prohibit all private cryptocurrencies, barring a few, to “promote the underlying technology of cryptocurrency and its uses”.

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The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, will be introduced in the winter session of Parliament, which commences November 29.

All major digital currencies fell over 15 per cent, with Bitcoin down by 18.53 per cent, Ethereum dropped by 15.58 per cent, and Tether down by 18.29 per cent.

Acknowledging the panic selling, Nischal Shetty, founder, and chief executive officer (CEO), WazirX, said, “Yesterday night, we witnessed a huge panic selling in our INR market on WazirX. It was primarily driven by the news of the crypto Bill being introduced in the winter session of Parliament.”

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The Bill’s description is the same as in January 2021 which induced immense fear in investors’ minds.

“Due to increasing demand, the Indian crypto market has been trading at a slight premium of 5 per cent – 8 per cent above the global markets. This panic selling event led the Indian market to correct and trade at a discount of almost 15 per cent – 20 per cent compared to the global markets for a brief period. The market is showing recovery and right now is at about 4 per cent discount,” Shetty told ABP News.

“Crypto can be classified as currency, asset, utility, or security. So, ‘currency’ is one of the many use cases of crypto. As an industry, we’re in sync with the fact that INR is the only legal tender in India, and about crypto being an asset/utility which people buy and sell. If tabled in Parliament, there will be discussions and deliberations around this Bill. The process of crypto regulation is in the works, and we need to have faith in our lawmakers. Let’s not panic,” Shetty added.

On several occasions, former Finance Secretary Subhash Chandra Garg had also mentioned that there should be a prohibition on the ‘currency’ use of crypto.

Earlier this month, Prime Minister Narendra Modi chaired a meeting to discuss the future of cryptocurrencies and it was resolved not to allow unregulated markets to become avenues of money laundering and terror financing.

Avinash Shekhar, co-CEO, ZebPay, said, “We’re awaiting more details on the Bill. There have been many positive steps taken by the government to learn and understand crypto and its impact on all stakeholders- investors, exchanges, policymakers. So, we’re looking forward to the Bill that takes into consideration all the inputs from those discussions.”

Private cryptocurrencies have prompted the Reserve Bank of India (RBI) to express ‘serious concern’ over Bitcoin, the world’s most popular cryptocurrency, currently trading at around $60,000. Having more than doubled in value since the beginning of the year, Bitcoin attracts swarms of local investors. The RBI in June had said that it was working on launching its own digital currency by December 2021.

“Huge sums of money are already getting traded in cryptocurrencies. The volumes are huge, and the number of investors over the period have only grown. A complete ban might lead to huge loss to the economy, and this may only give rise to the black market. The government, too, understands all the aspects, and feasibility, hence, we trust they are just looking at cutting down all the negative elements, such as money laundering, and allowing the rest to thrive. It certainly will help build trust among the stakeholders,” Kumar Gaurav, founder and CEO, Cashaa said.

Sathvik Vishwanath, co-founder and CEO, Unocoin, told ABP News, “We have to wait and watch about the contents of the Bill. It is unfortunate that the markets are reacting this way. It is tough to tell how it will impact the exchanges. It will be a lost opportunity, especially when the country is pushing for digitisation.”

According to industry estimates, India has 15 million to 20 million cryptocurrency investors, with total crypto assets valued at roughly Rs 40,000 crores ($5.39 billion).

Recently, there has been an increase in the number of advertisements promising easy and large returns on cryptocurrency investments, amid fears that such currencies are being exploited to deceive investors with false claims.