Anecdotal evidence suggests that cryptocurrency trading and investment is spreading fast in India. While numbers are unreliable, here’s some evidence. The largest digital stockbroker Zerodha has 7 million accounts, while crypto exchange WazirX, has 8.5 million accounts and Coinswitch Kuber has 11 million accounts.
If adoption is widespread and growing, the question we need to ask is: Has crypto adoption gotten too widespread to be ignored by policy-makers? Now, this raises a couple of sub-questions:
Second: If cryptocurrencies are unregulated, can a crash in say bitcoins or other coins, and resultant defaults destabilize the financial system. Most Indian bankers say unlikely. Bankers aver that no bank in India accepts cryptos as collateral for loans, nor do they provide margin funding, given RBI’s well-known anathema to this asset class. So hypothetically if bitcoin crashes to say $10,000, no bank in India would be hurt. A few youngsters who may have taken personal loans or borrowed on their credit cards to punt on these exchanges may default, but these are likely to be very small for the banking system. This argument appears convincing, but one can’t be sure where some leverage may be lurking.
This brings up the next question: How are other countries handling it? Many developed and emerging economies have proactively moved to regulate cryptocurrency players in their jurisdictions. An important point to note here is the trading itself can’t be regulated because blockchain like the internet lies beyond and outside national governments. National governments can’t regulate the internet itself. They can make rules on what websites may be blocked or how they may penalize people who use them for wrong ends.
Coming to jurisdictions that have been…