September 18 marks two months since the WazirX cryptocurrency exchange hack that led to loss of Rs 2000 crore worth of user crypto funds from India. The exchange has now halted operations with remaining user funds suspended and proposed a moratorium in Singapore where every Indian user will suffer a 43-45% loss of funds.
For the past 60 days, users have been protesting against the WazirX management, which has outrightly refused to take responsibility for the lost user funds. There have also been demands of a police investigation against the management, especially co-founder Nischal Shetty to determine whether the hack was an inside job.
Yet, when we see the response of the Indian government and authorities, it appears that the WazirX hack fiasco never occurred and there are no victims of India’s largest crypto hack. Not a single enforcement or investigative agency based out of India has shown any interest in the hack, retrieving user funds and holding those accountable to justice.
The frustrating long wait for Indian WazirX users to get back their funds is a comment on the Indian crypto landscape that is thriving and suffering at the same time.
A recent report published by Chainanalysis titled “The 2024 Global Adoption Index” has shown India as a global leader in the crypto space for the second consecutive year.
Despite achieving this milestone, the subject of crypto remains wrapped in mystery and uncertainty in India. Crypto in India is still a controversial topic, facing regulatory hurdles and high taxes. As the country prepares to release a much-anticipated policy paper on crypto regulation, the question arises: why is crypto still a hush-hush affair in India?
Regulatory Uncertainty Towards Cryptocurrency In India
India’s stance on cryptocurrencies has been stringent since 2018 as the same year, Reserve Bank of India (RBI) imposed a ban on banks providing services to crypto businesses. This move shocked many businesses such as WazirX, Coin DCX, and more as banking services play a crucial role in any crypto exchange.
However, the Supreme Court lifted the ban in 2020, but the damage had been done already. Moreover, in 2023, India’s Financial Intelligence Unit (FIU) issued show-cause notices for nine offshore crypto exchanges such as Binance, Bittrex, Bitstamp, Kraken, Bitfinex, MEXC Global, Huobi, Gate.io, and KuCoin for non-compliance with local regulations, particularly the Prevention of Money Laundering Act (PMLA).
In 2024 the trend continued, as the biggest global crypto exchange Binance was fined over ₹18 crore and KuCoin got a penalty of over ₹34 Lakhs. The data showcases that in India, the fear of regulatory crackdown always haunts the crypto businesses as well as crypto investors, preventing crypto from mainstream integration.
India’s Government Apathy and Myth about Crypto
Another reason for the secrecy surrounding cryptocurrency in India is regulatory apathy towards cryptocurrencies. For the Indian government, crypto is a source for stringent taxation but it offers practically nothing in return to crypto lovers.
There are some myths and misconceptions that haunt the normal people involved in the crypto space. India widely believes that crypto is primarily used by individuals with black money or those involved in illegal activities. Many people have a harsh view of cryptocurrencies and believe that crypto assets are used by people only looking to hide their black money or evade taxes. In India, the main reason behind these myths is a lack of awareness about cryptos and their use cases.
However, as every coin has two sides so do the cryptocurrencies. Slowly and surely, people in India also recognize the power of this industry and the opportunities that will come with it.
The Future Roadmap of India’s Crypto Adoption
Despite these challenges, the future of cryptocurrency adoption in India looks promising. The Indian government is likely to release a policy paper on cryptocurrencies. This policy paper could bring more clarity to the regulatory framework regarding cryptocurrencies.
The long-awaited crypto policy paper is developed under the consultancy of various agencies, gathering data from numerous crypto investors, legal experts, financial institutes, and crypto exchanges. The policy paper aims to ensure that its policies provide a proper regulatory framework to the industry and also address the concerns regarding the use of crypto assets.
The experts believe that the policy paper will address various issues such as,-how cryptocurrency will be classified whether as securities, commodities, or a new asset class altogether. It could also provide clarity on the protection of users’ funds, taxation, regulatory rules on crypto exchanges, and much more.
Moreover, the crypto policy paper could act as a catalyst to change the perception of Indian people regarding cryptocurrency. Once a legal framework is established, the changes will pave the path for crypto to become mainstream in India just like the stock market.
Conclusion
India’s crypto adoption rate may be the highest in the world, but this industry still faces many hurdles and challenges in gaining mainstream status. Regulatory uncertainty, government apathy towards crypto, and the common myth that only people with black money like to invest in crypto are hindering the industry’s potential growth.
Also Read: Exclusive: WazirX hasn’t moved funds from Liminal Custody Despite Ending Terms
