Cryptocurrency markets worldwide have been battered with billions of dollars being wiped out but India managed to stay relatively unscathed thanks to a cautious approach of the government and the RBI.
While the Reserve Bank of India (RBI) has refused to recognise cryptocurrencies and repeatedly issued warnings against trading in them, the government fired the tax bullet to wean off demand.
The collapse of FTX empire, which has wiped out the entire USD 16 billion fortune of co-founder Sam Bankman-Fried – one of history’s greatest-ever destructions of wealth, has shaken confidence in the already troubled industry that was struggling to gain mainstream credibility. The prices of the leading cryptocurrencies, Bitcoin and Ether, have plummeted.
In India, the RBI has been resolutely opposing virtual currency from day one while the government initially was toying with the idea of regulating such instruments by bringing a law.
According to the RBI, cryptocurrencies have specifically been developed to bypass the regulated financial system and this should be reason enough to treat them with caution.
Industry estimates put exposure of Indian investors to crypto assets at only 3 per cent.
Despite the global meltdown, India-focused cryptocurrency companies are not ringing the alarm yet. India’s largest crypto exchanges WazirX and ZebPay continue operations.
According to Association of National Exchanges Members of India (ANMI) president, Kamlesh Shah, steps taken by the RBI and government not to give recognition to cryptocurrency is appropriate at this point in time.
Describing cryptocurrencies as “clear danger”, Reserve Bank Governor Shaktikanta Das in the Financial Stability Report released in June had said that anything that derives value-based on make-believe, without any underlying, is just speculation under a sophisticated name.
The RBI has been cautioning the public about such virtual currencies and the government also backs the idea of banning private digital currency.