In the recently concluded general elections of India, the incumbent Indian Prime Minister Narendra Modi led coalition secured a majority in the parliament with fractured mandate on Tuesday.
Modi is all set to repeat his third term as prime minister of India however the unexpected poll verdict of a fractured mandate sent shockwaves through the Indian stock markets as sensex plummeted over 4500 points on a single day, causing loss of several million Indian rupees to investors.
The crypto community in India, which was keenly observing the political developments, has kept a strategic silence till now and investors are hoping for a fresh debate over crypto regulations in India under the new cabinet of Modi 3.0.
India has one of the highest taxations of 30% over crypto gains and the incumbent government and central bank in the past has viewed crypto with a skeptic lens, much to the disappointment of the desi crypto community.
Despite its reservations against the cryptocurrencies, the Indian government has been positive about the adoption of blockchain technology and over all web3 infrastructure in governance and regulated private sector businesses.
India’s apex public policy think tank NITI AAYOG has been running pilot projects based on blockchain technology in fields of pharma and fertilizers logistics, land records and university certificate records since 2019. The Ministry of Electronics and Information Technology (MeitY) of the Indian government has released a white paper in 2021 showcasing India’s strategy for blockchain development in the coming years.
Therefore, it becomes imperative to see whether the new coalition government will soften its stance on cryptocurrencies and what will be its vision for overall web 3 development in India.
Fractured Mandate Key to Success?
What is imperative to note is that the incumbent Prime Minister Narendra Modi has not received a strong mandate in this election unlike the previous two general elections in India wherein his Bharatiya Janata Party (BJP) had emerged as the single largest majority party. This means that the Modi government will now have to depend upon its coalition partners for getting bills passed and taking major policy decisions. There are also speculations that the fresh cabinet of Modi could see a new finance minister other than the current minister Nirmala Sitharaman. Sitharaman has been critical of cryptocurrencies, often claiming that it can never become a legal tender in India.
While pundits usually bank upon strong mandated governments to take major policy decisions, a fractured mandate of coalition parties could also open windows to the world of political liasoning and negotiations- something that the crypto community in India could look forward to- if they see a chance for some liberal regulation policies.
In this article, we will evaluate the journey of cryptocurrencies and web 3 development in India in the past five years and focus upon what to expect in Modi’s possible third term.
Bill For Banning Crypto
In 2019, an inter-ministerial committee set by the Modi government had proposed a blanket ban on private cryptocurrencies in India and levy penalties from citizens engaging in any crypto activities. The committee led by the then finance secretary Subhash Chandra Garg had proposed the “Banning of Cryptocurrency and Regulation of Official Digital Currency” bill. The committee was however in praise of decentralized ledger technology (DLT) also known as blockchain and proposed its use in banking, insurance, financial services and other sectors to increase transparency and efficiency in operations. The committee also urged the Indian government to think of developing a centralized digital currency.
No Ban but 30% tax on crypto: Indian Govt
While the Indian parliament did not implement the “Banning of Cryptocurrency and Regulation of Official Digital Currency” bill, it quickly introduced 30% tax and 1% TDS (tax deducted at source) over any crypto gains by an Indian citizen/business/entity. India’s central bank- The Reserve Bank of India (RBI)- introduced a directive preventing all regulated banks from dealing in cryptocurrencies. The central bank cited concerns over “consumer protection, market integrity and money laundering,” and its move led to a widespread exodus of crypto investors in the country.
Indian Govt’s Current Stance on Crypto
The Indian Ministry of Corporate Affairs (MCA) – the corporate regulatory agency in the country – has said in the past that cryptocurrency functions on false inducements of massive returns. The agency also clearly described the sale and issue of crypto assets as “Ponzi schemes”- an investment fraud.
India’s current Finance Minister Nirmala Sitharaman has remained slightly ambiguous about cryptocurrency. She clarified recently that the government’s position has always been that crypto assets can be traded, “but that the government hasn’t regulated them in the past and won’t change that stance yet.”
Overall Web 3 adoption in India : What experts say?
Despite its skepticism for cryptocurrencies, the government has been fairly positive towards overall web3 (an umbrella term for decentralization, blockchain technologies and digital token system) development in India.
As mentioned earlier, the Indian government sees potential in blockchain to find solutions for inherent governance problems like corruption, high cost in operations, inefficiency and lack of transparency. It also is investing in developing web 3 infrastructure as the blockchain technology is now being adopted in the governance of even tier 3 towns and villages of India.
“Web3’s decentralized nature empowers individuals, fostering a more equitable digital landscape, regardless of who’s in power. I believe that the new government will build regulations supporting its adoption. Web3’s rapid growth and potential for economic and societal impact make it an attractive area for government support. This shift is undeniable, and the time for Web3 is now,” says Abhishek Singh, co-founder and CEO of SecureDApp.
What Crypto Lovers want and what they can expect from Modi 3.0
Crypto enthusiasts in India have been demanding a reduction in TDS from 1% to 0.01 % along with other critical reforms such as a revaluation of taxation on virtual assets, clarity on regulation framework and creation of special economic zones for fostering the growth of web 3 adoption in India.
However, it is safe to say that crypto lovers in India, at this moment, are not exactly spoilt for choice as there is no mainstream political party or politician supporting their concerns. Even if the newly elected government introduces radical policy decisions, crypto is unlikely to be an immediate priority for them, if their past performance is a hint.
However, the fractured mandate has also allowed room for debate over the existing laws and regulations and it will be interesting to see if the Indian crypto community would be able to let their woes be heard by any political party in the coming days.
Also Read: Will India Get Pro Crypto Finance Minister Post Elections?
