The RBI has been adamantly pushing the government for a crypto ban in India. However, finance minister Nirmala Sitharaman said that the decision to ban cryptocurrency would need a major collaboration on the international scene. The truth is that they are yet to ban crypto in India, but if it happens, what will happen to the money of crypto investors in India?
In November 2021, the headlines in major newspapers in India showed that crypto might face a possible ban in the country. The news permeated every nook and crannies of the internet, raising many disturbing concerns among investors. Most investors were bothered about what would happen to the money they invested in cryptocurrencies.
Banning cryptocurrency started with the RBI (Reserve Bank of India). The central bank moved for the motion to ban cryptocurrency and its investment in India. This desire was just a sentiment that wore off with time.
However, it was rekindled when the finance minister of India, Nirmala Sitharaman, brought it up again to the parliament on the 19th of July 2022. She reminded the parliament that the Reserve Bank of India wanted the prohibition of cryptocurrencies in India.
For further clarification of the matter, the Finance Minister added that any ban in India would need a significant global collaboration. The truth is that the news is speculative for now. However, many investors are scared of the outcome. Primarily, they have been disturbed about what will happen with their financial investment in cryptocurrency if it is banned in India.
Again, will the ban significantly impact the tech sector in India? If it will, what will the effect be, and to what degree will the impact be? Moreover, India is one of the largest users of cryptocurrencies globally. So, will the cryptocurrency prohibition in India affect the crypto trading market globally? Again, if it will, what will be the effects, and how heavy will the impact be on the global crypto market?
In this article, we will try to answer these questions using the feedback we got from various crypto exchanges and analysts in the market research industry. So, let’s answer some of the major questions surrounding the news of the ban and the effects if it eventually happens.
Does The Crypto Ban Mean Anything For Investors?
Four years ago, the Reserve Bank of India banned banks from transacting with crypto exchanges. This prohibition led to many investors rallying around crypto exchanges to sell off. The rush was because the RBI gave investors three to six months to sell off their holdings or risk losing them all. However, many investors still did not sell their holdings. Rather, they sent them to foreign exchanges where no national government was disturbing with a ban.
Recently, the news headlines have been about cryptocurrencies. It is important to note that crypto is making the headlines for negative reasons. One of the reasons is the decline in its prices. Secondly, people lost their money because of the bankruptcy of cryptocurrency firms like 3 Arrows Capital and withdrawal suspension by Vauld. However, Vauld suspended withdrawal because the market’s condition was bad.
Interestingly, the ban or the news of the ban has raised more awareness of crypto in India. More people are adopting cryptocurrencies as a means of transaction and a store of value. As I mentioned before, India is one of the major countries in the world with a high rate of cryptocurrency adoption.
Specifically, in the last three months, India has ranked top on the list of countries with an increased rate of mass crypto adoption. According to Gemini’s report, the crypto exchange mentioned that over 50% of crypto investors from India had been first-time users or investors in the last year.
At the backend, all the news and talks about banning crypto and people losing their crypto investment funds drive people to see that their investments are no longer safe.
Here is what the Vice President at Wazirx, Rajagopal Menon, has to say about the issue and the news; “In the unlikely event of a ban on crypto in India, the investor money is safe and will be returned to them at a stipulated time frame to be decided at the time such an unlikely event occurs. Investors own the crypto that WazirX investors have on the exchange, and they have the facility to withdraw as they please. As a company, we have never stopped crypto withdrawals on WazirX in the past and have always been transparent about any upcoming, transient maintenance activity. However, prudence requires investors to check the crypto ownership and terms and condition of withdrawals on their investment platforms.”
The truth is that most of the cryptocurrency exchanges in India, for example, WazirX and CoinSwitch Kuber are just custodial wallets. These exchanges only carry out funds transfers from cryptocurrency to Indian Puppies and vice versa. The exchanges do not claim ownership of investors’ money, so investors can withdraw their money whenever they want to.
If the ban eventually happens, crypto investors will have to move their crypto to other physical wallets. Alternatively, they can sell it on the exchange and withdraw their holdings as Rupees. However, everything will rise and fall on what the government decides about the cryptocurrency ban.
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Will Cryptocurrency Exchanges Do anything about it?
Countries like the Central African Republic and El Salvador have become safe havens for cryptocurrencies. In these countries, Bitcoin is legal tender. Also, some countries do not tax cryptocurrency-related activities, for example, Bermuda, Portugal, and Switzerland.
If things eventually become difficult for exchanges in India, they will have to look for a more crypto-friendly environment. In other words, if the ban becomes strict, these companies will have to leave India.
This event will not be the first in the history of crypto exchanges and strict laws. Before now, crypto firms like Vauld and ZebPay moved to Singapore. They wanted a location where the government would not drill people’s wallets with tax laws.
There is no fixed opinion on cryptocurrency tax policies, so investors are scared of what may happen in the future. No one is certain about the position the government will take and cryptocurrency and its investors.
However, cryptocurrency firms will have to leave India to preserve their companies if the worst happens. Again, some analysts say that most cryptocurrency exchanges will keep operating underground, and investors will look for illegal ways of buying and selling cryptocurrencies.
Will the Ban Affect Technology in India?
Because crypto startup firms are part of the tech industry, the ban will affect the tech industry. The ban will push many of these firms out of the country to more crypto-friendly locations for business.
In conclusion, although nothing is solid about the ban, investors must prepare for what will happen. Everyone should have a plan B which involves protecting your money from loss. You can either decide to convert your holdings to Rupees or move them to other exchanges. While you wish for the best, keep yourself prepared for the worst. No matter what happens, never lose your investments.