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Crypto currency investment has become a craze with many Indians. More than 20 million Indians have invested around $5.5 billions in different types of digital currency. Investors hope to earn disproportionate returns on crypto investment. The leading crypto exchange WazirX reported a turnover of $43 billion during 2021.
How many Indian investors know the technology, risk as well as the legality of investment in digital assets?
RBI has been opposing Crypto saying that it is a danger to the financial system.The much awaited regulation for regulating the CBDC is yet to be notified. The Finance Secretary of Govt of India says it is neither legal nor illegal. A tax of 30% has been imposed on the gains from transfer of digital assets. The Supreme Court has refused to ban crypto currency.
Of late there is a lot of volatility in crypto market. There also possibility of the funds being diverted for terrorism and other anti national activities taking advantage of absence of any regulation.
Crypto investment is not a substitute for stock market investment. The exchange risks are not hedged. According to the Governor of RBI there is no basis for the valuation of the cryptos.
The commercial banks are also concerned about the possibility of a parallel digital financial system with no accountability.
Hence the government of India and RBI should make their stands very clear. If we can not ban it, we should have a comprehensive regulation to regulate the digital currency. The investors should also be told the possible risk exposures of investment in crypto.
