Priyanka Tiwari
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Suspense crime, Digital Desk : The Indian government is preparing to release its long-awaited "consultation paper" on cryptocurrencies, but the country's anxious crypto industry should temper its expectations. According to sources, the paper will walk a very fine line—praising the underlying technology while deliberately avoiding any firm stance on how to regulate digital assets like Bitcoin and Ethereum.
The Good News: Acknowledging the Tech's Potential
The paper is expected to be positive about the revolutionary potential of the technology that powers cryptocurrencies, such as blockchain and distributed ledger technology (DLT). The government will likely acknowledge that this technology can be used for innovation in finance, supply chain management, and other sectors.
Think of it as the government saying, "We like the engine (blockchain), but we're still not sure about the car (cryptocurrencies)." This marks a subtle but important shift, as it shows an appreciation for the technological benefits, separate from the speculative nature of crypto assets.
The Bad News: Regulatory Limbo to Continue
However, for the millions of Indian crypto investors and the struggling exchanges, the paper will likely be a disappointment. It is expected to stop short of providing what the industry has been begging for: clear regulatory guidelines.
The document will not recommend whether cryptocurrencies should be treated as a currency, a commodity, or a security. It will also not propose a framework for licensing exchanges or protecting investors.
Why the Hesitation?
This cautious approach stems from deep-seated concerns within the government and, most notably, the Reserve Bank of India (RBI). The central bank has repeatedly warned about the serious risks associated with cryptocurrencies, including:
- Financial Instability: The potential to undermine the country's macroeconomic stability.
- Illicit Activities: The risk of being used for money laundering and terror financing.
- Investor Protection: The lack of underlying value and extreme price volatility puts small investors at high risk.
The government's goal with this paper is not to provide answers, but to start a formal public conversation. It is intended to gather feedback from stakeholders—including the public, industry experts, and academics—before making any definitive moves.
In the meantime, India's crypto industry remains in a difficult position, crippled by high taxes (a 30% tax on gains and a 1% TDS on all transactions) and plagued by the ongoing lack of a clear legal and regulatory framework.
