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Regulatory inconsistency may still scare off crypto investors following India’s backtrack, says GlobalData

June 6, 2021 Financial No Comments

Following the news that the Reserve Bank of India (RBI) has clarified that a 2020 Supreme Court ruling overruled a 2018 circular that caused many banks to warn customers to avoid cryptocurrencies;

Danyaal Rashid, Thematic Analyst at GlobalData, a leading data and analytics company, offers his view:

“Recently, one of the biggest criticisms of cryptocurrencies has been the regulatory risks posed by governments, specifically in the two largest markets in the world – India and China – where many were under the impression that cryptocurrencies were banned. If these globalized, decentralized currencies are not valid in markets that make up around 2.8 billion people – more than a third of the world’s population – their validity everywhere else comes into question.

“However, the situation in India has changed, as the RBI has backtracked on a 2018 circular that practically banned cryptocurrencies. While this is not conclusive, and the Indian Government is still establishing its stance on cryptocurrencies, it is a good indication that its stance will involve regulation rather than an outright ban: something that was unclear until now.

“Despite this promise, this regulatory volatility may scare off investors. People may fear that if they buy cryptos now, there is always a lingering chance that there could be a government crackdown that could render their investments worthless. This lack of clarity may undermine faith in the crypto markets in India, even though people can trade again.

“The Indian Government’s stance may set the stage for regulation across other countries. Western nations are looking at how they can effectively regulate these cryptocurrencies. As countries such as India look to soften their stance, nations like the US and the UK may look to harden theirs. In these nations, cryptos are treated as assets rather than currencies, which complicates their use in payments. As adoption rises, this may also affect enforcement of these regulations.”

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