India Should Shed Confusion Over Crypto Regulations

Crypto market is on a roll. After Donald Trump’s re-election as the next President of the United States, the cryptocoins are witnessing increased investors’ interest. That is due to the fact that Trump administration is expected to come up with favourable policies, supporting the growth of crypto assets in the world’s largest economy. The most prominent crypto coin, bitcoin’s price has neared $90,000 in recent days, which was a rise of 25 per cent since the presidential election results on November 5, 2024.

Not only bitcoin, but also other crypto coins have shown uptrend as Trump became the President-elect of the US. Notably, Trump’s support for the growth of cryptocoins was more than evident during his election rallies. He had promised voters that the United States would be the ‘crypto capital of the planet’ if elected to power. Many believe that he is going to follow through his promise on the crypto assets.

As Elon Musk - Founder of SpaceX and Tesla, who played a major role in the winning of Trump, is a supporter of crypto assets, Trump administration’s policies are likely to lend a supporting hand to the growth of crypto assets.

Meanwhile, other factors have been driving the rise of crypto coins in recent months. After four-year of tightening, the US Federal Reserve has started reducing interest rates. As reduction in interest rates frees up capital, some have flown to alternate assets like crypto in recent months. Secondly, the emergence of bitcoin ETFs has played a critical role. Approval of bitcoin ETFs in the US has led to more institutional money flowing to crypto currencies in recent time. Such formalisation augurs well for the future growth of crypto coins. Under Trump, more such formal instruments are likely to get green signal.

Meanwhile, the ambivalence of Indian government on crypto assets continues. Neither India has declared trading in crypto as illegal, nor it has recognised this asset class as viable alternative. Such middle path has led to confusion among investors. While the Reserve Bank of India has genuine concerns with regard to money laundering practices through parking money into crypto assets, lack of regulation has hurt more investors than protecting them.

For instance, the cyber attack on one of the leading Indian crypto exchanges is likely to be resulted in huge losses to many Indian investors. These investors can’t go back to the regulator or any other Indian investigative agency for getting back their money. Now, the question comes why these investors have parked money in these assets when this is not recognised as legal in India. But, this has also not been declared as illegal in the country, many can argue.

Against this backdrop, it will be better if the Indian government can take a clear stand on this emerging asset classes. As crypto gains currency in the US, many Indian investors will be lured to invest in these alternative assets. But lack of regulations and continuing ambivalence can hurt investors more than dissuading them to stay away from those assets.