India should come up with cryptocurrency regulations

Cryptocurrencies like bitcoin have seen phenomenal rise in their value last year. With value touching close to $57,000, investors have entered the market in droves. Though around 10 million people in India are trading in this virtual currency, the country is yet to come up with any regulations. This, in turn, is prompting a lot of people sitting on sidelines. "The volume is likely to double in our country as the bull run in the crypto currency continues. The government should come up with regulations at the earliest and educate people on this emerging asset class," Arjun Vijay, Co-founder and Chief Operating Officer (COO) of Giottus Cryptocurrency Exchange said in an exclusive interview with Bizz Buzz

There are many controversies surrounding the crypto currency space in India. Though government is yet to reach at a consensus on regulating this new virtual currency, there are some reports indicating a complete ban is also possible. What is your take on this matter?

It's technology and it has money aspects related to it. That is why the government should regulate it because it has huge repercussions. Typically, India looks at the western nations to understand the nuances of technology. The government tries to understand what the precedence is, how many nations are regulating it and how can it be modified for Indian consumers.

Indian government has been in double minds for long time. What we have seen with respect to crypto currency is that the more time it (regulation) is taking, it is getting much more democratised with wide adoption. This year, Elon Musk (promoter of Tesla and SpaceX) has been very vocal in his support for bitcoin. Other such developments in the crypto currency space are hard to ignore for the government.

At this time, if the government bans it, it will be like a silo with most governments adopting it. There is reasonable possibility that crypto currency becoming mainstream because it has the potential of becoming the future (currency). If India takes a regressive step, it will not be good (for its economy).

India has the foundation of a good technology base and this space can provide significant advantage to the country. India can take a leadership position in the crypto currency space. In this perspective, regulating this space is ideal. If that happens, the regulator will decide whether the technology is robust or not along with other norms. It will require a detailed analysis of the norms.

Indian government is taking a calibrated approach, which is a welcome move. It has set up two committees which are studying this space. Though there is no consensus yet, this space is likely to see regulations soon.

How many participants are now transacting in Giottus Cryptocurrency Exchange? Have you seen the interest going up in bitcoin after its price touches sky high level now?

Across the world, the scenario has changed after bitcoin price shot up. People used to say that bitcoin and other virtual currencies are fads but bitcon has proved them wrong. Those who have bought bitcoin at around $80-90, are now sitting on 10 times of their purchase value.

So, you can ignore it for once or twice but when you see it coming back again, people are ready to invest. As it is bull market, everyone is interested to invest. In India, around 90 lakh people are investing in crypto currencies. We have our share in this investment ecosystem.

How was the business in 2020 and what are your expectations about this year?

As this is a bull market, we hope many more investors to come in and invest. We expect our volume to double in next three to six months. If bitcoin continues to create wealth for investors, exponential growth will happen. A lot of people are sitting on the sidelines expecting regulations to come up. If that happens, then investors will come in droves.

There are a lot of concerns regarding the taxations also. Has the matter settled now?

As far as taxation is concerned, we are part of services sector. GST (goods and services tax) is imposed on us at the applicable rate. The second tax is imposed on the profits that an investor makes. A lot of experts have different opinions about the nature of this asset. Many crypto currency exchanges have moved out of India due to uncertain regulatory environment.

What the government should do in this respect?

The government should create awareness about this asset class among investors. Moreover, business friendly environment should be created for the exchanges to continue in India. Because there is no point of having brain drain. Why should Indian talent go outside and do business, when they can do so in the country. This will create a lot of employment within the country. India has the talent base to make it big.

Also, crypto currency is working on blockchain technology. And this is in nascent stage of its evolution. So, the government should create a committee to look at the continuous changes that are taking place with respect to this new technology.

Source of money of investors is always a tricky issue for exchanges.

How do you ascertain that the money invested is accounted for?

There are standard procedures which are followed by the crypto exchanges through self-regulation. For example, we do KYC (know your customer) for our customers like any other financial institution. We receive money through bank account and do all transactions through the banking route. We also do background check. This is because we want to create a healthy ecosystem.

How is the retail investors' participation in cryptocurrency exchanges?

We have many retail investors participating through our exchange. The minimum amount of investment is Rs 100. So, we need to educate people on this asset class. We see a lot of people entering the stock market for the first time. Same kind of philosophy applies to investing in cryptocurrencies as well.