When it comes to cryptocurrencies, India is fast emerging as a global trading hub. In fact, only a few months ago, India was reported to have become the third largest cryptocurrency trading market in the world. But Indians would have to wait a little longer to get their hands on the world’s first legal Bitcoin trading market.
The crypto world has been making headlines lately for the negative news, with the prices crashing as well. Still, Indian companies have been keen to explore this opportunity, thanks to bitcoin’s popularity in the country. Some of the top names in the country are already engaged in the space like Zebpay, Unocoin, Coinsecure, etc.
The Reserve Bank of India (RBI) recently issued a warning against crypto trading, saying that digital currencies like bitcoin are not yet ready for primetime. However, the country’s largest private sector lender has suggested a different road map. An HDFC Bank report said that the current regulatory and legal framework is not fit for purpose, and within a couple of years, Indians will be fairly well-equipped to use the technology.In India, the current status of cryptocurrencies is in a state of confusion, meaning they are neither legal nor illegal. Although they were not completely banned after an appeals court overturned the country’s central bank’s ban on decentralized currencies – the Reverse Bank of India in March 2021 unofficially asked financial institutions in the country not to transact with cryptocurrency platforms. Amidst all this uncertainty, HDFC, one of India’s largest banks, has released a report with an interesting commentary on the future of cryptocurrencies in the country. The report, titled Cryptocurrencies: Fad or Forever predicts that cryptocurrencies are a potential asset class that can be used to hedge against the volatility of other major asset classes. But now that the Reserve Bank has begun to intervene in the crypto sector, the crypto space needs to be watched closely, HDFC Bank said in a report.
A matter of time
Chief economist Abhik Barua of HDFC Bank said in a report that it is only a matter of time before Indian investors get legal access to cryptocurrencies. Moreover, in terms of portfolio diversification, the report’s authors expressed optimism that bitcoin, like gold, could become an important asset class. We found a positive correlation between the daily returns of gold and bitcoin. Although the correlation was initially weak, it is now increasing. In terms of portfolio diversification, it has the characteristics of a good hedge, the report said. The report also warns that the high correlation between the price of bitcoin and Google searches suggests that it may be more of a fad. One of the main positives from the report is the greatly increased interest in cryptocurrencies. The report highlights bitcoin’s efficiency and profitability, as well as the growing number of non-zero bitcoin addresses – 33 million by 2020, up from 3.9 million in 2014. This indicates that digital currencies are here to stay and will not disappear, the report said.
Banks sever ties with Indian exchanges for crypto currency
On the other hand, some other leading financial institutions in India such as ICICI Bank, Paytm Payments Bank and Yes Bank have severed their ties with the cryptocurrency industry. So most cryptocurrency exchanges are forced to find solutions to the major challenges posed by the big Indian banks. But currently, the Indian government is forming a new committee of experts to draft a law on cryptocurrencies.
Are cryptocurrency exchanges in India planning to become legal again?
Reportedly, cryptocurrency exchanges in India are once again considering the legal route and may be stepping to the apex court against the central bank’s directive. This announcement came a few days after the Reserve Bank of India’s unofficial announcement. Almost all cryptocurrency exchanges in the country have been forced to suspend acceptance of Indian rupee deposits as banks have refused to serve them. The cryptocurrency platforms are now reportedly considering appealing to the Supreme Court for a possible ruling. The main argument of these cryptocurrency exchanges is that the RBI’s appeal, though unofficial, does not take into account the March 2020 Supreme Court decision. The Indian Supreme Court has declared the unofficial ban on cryptocurrencies unconstitutional and overturned it. As per the RBI’s 2018 directive, the central bank has asked financial firms in the country not to do business with cryptocurrency companies. Nevertheless, it could be argued that banks are entitled to refuse the services of people they consider untrustworthy. One can even argue that regardless of the RBI’s stance on cryptocurrencies, the bank believes that the market is too volatile for lending. In the meantime, cryptocurrency exchanges may have to argue and prove that this thinking is speculative and to their detriment.
What is a possible solution?
Simply put, an official decree from the central government is exactly what the cryptocurrency industry needs to remove all uncertainty. There was a possibility of passing a bill on crypto currency during the 2021 budget session, but it seems to have been postponed. The Economic Times report also stated that the Indian government has changed its stance on cryptocurrencies. Instead of banning them, the government now wants to look for ways to regulate them. Therefore, they are forming a new committee on cryptocurrencies that may soon submit a report to the government. The report states that the Indian government believes that the previous Subhash Garg Commission report on cryptocurrencies is outdated. A new report is therefore needed to look at cryptocurrencies with fresh eyes. In addition, the central bank has announced the creation of a central bank digital currency (CBDC) for the Indian rupee, which could be one of the likely reasons for the negative attitude of banks towards cryptocurrencies in India.With the crypto game now evolving into a global market major players have moved to make sure their country’s citizens are well included in the new age of digital currency. With India being a major global growth driver for the crypto market, the country’s Chief Minister Arvind Kejriwal has made it clear that the State will do its utmost to expedite the process of bringing crypto trading to the masses in the country.. Read more about banks ban cryptocurrency and let us know what you think.
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