Last September, Jayant Sinha, the chairman of the Parliamentary Standing Committee on Finance in India, hinted of another potential ban on cryptos when he referred to the use of cryptocurrencies “In terror financing and for domestic security threats is something we have to be mindful of”. Indeed, Indian authorities have been wary of the potential dangers inherent in crypto trading for some years. Back in 2018, India banned it outright, though the Supreme Court overturned the ruling two years later. In early 2022, India’s struggle to formulate its approach to cryptocurrencies began to resurface. “Our solution will have to be distinct and unique simply because of our unique circumstances”, Sinha continued. India is weighing up the potential benefits of crypto trading against its perils, with strong-voiced opinions on both sides of the argument. In the meantime, the value of cryptocurrencies themselves can tend to be battered in the political storm, as we will see. For those with an eye on crypto trading as CFDs, let’s look at the crypto tension a bit more closely.
Like Horse Race Winnings
In early February, Finance Minister Nirmala Sitharaman announced that crypto transactions would be taxed at the severe rate of 30%, in a similar way to winnings at the horse races. Some reacted optimistically, like Darshan Bathija of Vauld crypto exchange, who declared that “Imposing the tax rate makes crypto trading official now and any concern of a ban is off the table”. Indeed, the announcement propelled the price of Bitcoin upward by over 2% and Bloomberg’s report was that “India took a step closer to adopting cryptocurrencies after years of wavering on its stance”. There seemed to be ample reason for legitimizing digital currency, if only because the Indian crypto market grew by a staggering 641% in the first six months of 2021.
Othersnoted, however, that the heavy tax could persuade traders to move to foreign crypto platforms, which would diminish the revenue.Then, about a week later, the governor of the central bank, ShaktikantaDas, made his own feelings on the subject known: “Private crypto currency or whatever name you call it is a big threat to our macroeconomic stability and financial stability”. Das’concerns surrounded money laundering and the financing of terrorism. He also warned investors about getting involved in crypto trading for the reason that“Cryptocurrency has no underlying, not even a tulip”. Going back a few months to November 2021, a bill to regulate cryptos came before parliament which, according to the website, sought to “Prohibit all private cryptocurrencies in India”. Traders believed it was possible crypto trading might be totally outlawed and Bitcoin sunk by 12.2% on Wazirx, the Mumbai crypto exchange, as compared with the global loss of only 1.8%. And this brings us to the topic of the impact of political scrutiny onthe value of digital money itself.
China
It was in September of last year that the People’s Bank of China made it illegal for overseas crypto exchanges to serve Chinese residents and banned all crypto trading business activities. The Chinese leadership was also committed to rooting out all Bitcoin mining from the country as a measure for achieving carbon neutrality by 2060. Thereafter, CNN reported that “Bitcoin fell 5% on the news,” and “Ethereum… was down 9%”. Traders immediately lost confidence in crypto in substantial numbers. Then, in November, Chinese officials spoke up again, calling crypto mining an “Extremely harmful” threat to the nation’s environmental commitments. Apparently, this was an expression of the government’s determination to empty out the country of any lingering crypto miners. Bitcoin lost 2.9% of its value within those 24 hours; Ethereum lost 4.6%; and Solana lost 6.7%. This did not seem to Fortune to be a coincidence, who reported that “Beijing’s harsh statement on crypto mining likely contributed to a crypto selloff on Tuesday that extended into Wednesday”. A parallel cause may have been operating across the Pacific, where US regulators made new tax-reporting requirements for cryptos. Again, we saw the sensitivity of crypto prices to the talk of regulators
Next Chapter
The next chapter in the saga of cryptos in India and in the world is being written as we speak. All ears are cocked to hear further details of India’s approach to this charged issue, about which feelings on both sides run deep. The digital rupee is supposed to debut on April 1st, an event anxiously awaited by the entire country. In general, it’s yet to be seen how regulators plan to address their crypto concerns, if indeed cryptotradinghas a future in India. In the meanwhile, there is no shortage of volatility in the price movements of cryptocurrencies, which sets the stage for CFD traders to keep an eye on the markets for future opportunity and risk. The only true verdict is to stay in close touch with financial news in weeks to come.
