India to review strict stance on virtual assets as countries embrace crypto

As a result of emerging reactions from countries towards virtual assets, India is reviewing its strict position on cryptocurrencies. According to a senior government official on Sunday, the country is considering favouring its usage and acceptance. 

India’s Economic Affairs Secretary Ajay Seth said in an interview that the government is making insights on the cryptocurrency discussion papers. 

“More than one or two jurisdictions have changed their stance towards cryptocurrency in terms of the usage, their acceptance, where do they see the importance of crypto assets. In that stride, we are having a look at the discussion paper once again,” he expressed.

The review follows crypto-friendly policy announcements by U.S. President Donald Trump. This could further delay India’s publication of a discussion paper on cryptocurrencies that was due for release in September 2024.

U.S. President Donald Trump on Thursday ordered the creation of a cryptocurrency working group tasked with proposing new digital asset regulations and exploring the creation of a national cryptocurrency stockpile, making good on his promise to quickly overhaul U.S. cryptocurrency policy.

The order was cheered by the crypto industry which had been pushing for the new administration to send a strong signal of support in Trump’s first few days in office.

Cryptocurrency experts have noted that Trump’s order has the potential to push cryptocurrencies into the mainstream if implemented by the relevant regulators. The announcement follows Tuesday’s Securities and Exchange Commission (SEC) announcement that it was creating a task force to overhaul crypto policy.

Seth did not explicitly make reference to the United States’ latest action evaluating whether to create a national digital asset stockpile.

Also Read: US strategic bitcoin reserve speculation: the crypto arms race has begun.

India’s tough position on crypto

Despite India’s strict position on digital assets, Indians have poured money into cryptocurrencies. 

A report by blockchain analytics company Chainalysis in last September showed that India led the way in global adoption of cryptocurrencies for the second straight year.

The report, which tracks adoption across four sub-categories in 151 countries, revealed that India ranked high on usage of centralized exchange and decentralized finance assets from June 2023 to July 2024.

Seven of the top 20 countries in Chainalysis’ global adoption index were central and South Asian countries such as Indonesia, Vietnam and the Philippines.

The report claimed that the overall decentralized transaction volume carried out in retail-sized transfers, under $10,000 worth of crypto, was recorded in countries with lower purchasing power per capita.

“India has also got a fairly widespread level of adoption across different assets of crypto despite restrictions, implying new participants to crypto would have been participating via services that were not banned. Now we’ve started to see some of those restrictions get rolled back, for example with Binance, which is probably just going to amplify adoption in the country,” said Eric Jardine, research lead at Chainalysis.

Meanwhile, India has taken a tough stance against cryptocurrencies since 2018 with the Financial Intelligence Unit (FIU) issuing notices to nine offshore cryptocurrency exchanges in December 2023 for non-compliance with local rules.

Last June, the world’s biggest crypto exchange, Binance, was hit with a fine of $2.25 million in India. This followed a month after it registered with the FIU in an effort to resume operations in the country.

Also, crypto exchange KuCoin registered with the regulator in March but faced a smaller penalty amount of 3.45 million rupees.

India’s market watchdog recommended that several regulators oversee trade in cryptocurrencies, interpreting that some authorities in the country are open to allowing the use of private virtual assets.

That position stood against statements by the nation’s central bank, which has maintained that private digital currencies represent a macroeconomic risk.

Another Asian country, Indonesia, which has banned the use of cryptocurrencies as a means of payment but allows investment in the assets, saw robustness in its trading. The country recorded $157.1 billion inflows in trading of digital assets in the 12 months to July, according to Chainalysis.