With the collapse in cryptocurrency prices over the last few months, the strength of the “asset” had already come under the scanner, especially when agencies such as the Reserve Bank of India, and even a section of the finance ministry, had raised doubts over their sustainability in the long term.
With the house divided, the government had opted to put off an immediate decision last winter with Prime Minister Narendra Modi and finance minister Nirmala Sitharaman calling for global cooperation, arguing that steps taken by one country alone could not be sufficient to regulate it. In any case the exchanges were forced to go slow after Sitharaman brought it under the tax net and also introduced TDS in the last Budget, although a ban or regulation was still being debated, given the regulatory vacuum in the country.
The rush to regulate had also slowed, given that the base of investors was not as high as 1.5-2 crore as some of the exchanges were making it out to be. “The numbers are probably a third of the numbers that were cited,” an officer said, adding that a majority of the investors had very small ticket sizes.
There were, however, indications from officials that the government, which is firming up the agenda for next year’s G20, may push for discussions under India’s presidency in 2023.
Officials have maintained that internal consultations – largely involving the finance ministry and the regulators- are underway and a blueprint will be finalised soon. But the latest set of actions is expected to put those discussions on the backburner as regulators across the globe keep close tabs on the product that had gained massive popularity with the younger population.
“The central bank and some others had articulated some of the concerns are crypto assets being a money laundering tool and opaqueness, which is what the agencies are investigating now,” said an officer.
Last week the Enforcement Directorate said it had conducted raids on one of the directors of Zanmai Lab, which owns crypto exchange WazirX, and frozen their bank balance. It accused the entity of helping other bodies route funds out of the country through the crypto route.