Cryptocurrency cartels mushroom sans regulation in India, millions at risk

Millions of innocent Indian users have risked their hard-earned money in highly-volatile cryptocurrencies which are not a legal tender and the country stands on the cusp of an economic disaster in the making as self-styled crypto cartels bombard citizens with misleading ads while relevant government authorities quietly watch the whole saga from the sidelines.

The deafening silence on the part of statutory authorities to the increasing number of crypto platforms luring the public into investing from as low as Rs 100 is "incomprehensible" in absence of a dedicated law on crypto assets and crypto currencies, lament leading legal experts.

Also Read: Indian government likely to block 'irresponsible' cryptocurrency ads

A recent advertisement by the Blockchain and Crypto Assets Council (BACC), a part of the Internet and Mobile Association of India (IAMAI), and industry players like CoinSwitch Kuber, CoinDCX, WazirX and Zebpay, claimed that crores of Indians have invested over Rs 6 lakh crore in crypto assets.

India has recently seen a spurt in the popularity of crypto exchanges and platforms in recent months like CoinSwitch Kuber (CSK), WazirX, CoinDCX, ZebPay, Unocoin and BuyUcoin, etc.

According to Dr Pavan Duggal, a seasoned Supreme Court advocate and a cyber law expert, if Indians have invested over Rs 6 lakh crore in the crypto ecosystem and there is absence of legal clarity, it is very much possible that a large number of people could lose huge chunks of money.

"It is also possible that some people may make a lot of money. The chances of an innocent user being made a victim of this impending economic disaster cannot be ruled out. The quicker India as a nation wakes up from its deep slumber and starts addressing the crypto ecosystem, the better it will be," Duggal told IANS.

In some respite for the common investor, the Indian government is finally aiming to prohibit crypto ads that are growing across media platforms and were seen in plenty during the IPL 2020 and the ICC Men's T20 World Cup cricket matches.

In a memo outlining the summering of a meeting between Prime Minister Narendra Modi and the crypto industry players over the weekend, the government has shown its displeasure over such mushrooming advertisements that promise wild profits.

Also Read: PM Modi chairs meet on cryptocurrency; concerns raised over money laundering, terror financing risks

However, the bigger crypto threat looms as the country has still not made up its mind on the legalities pertaining to crypto assets.

New Delhi-based cyber law expert Virag Gupta said that taking the benefit of zero regulatory framework around crypto, the "self-styled godmen" of this industry have made their own regulatory mechanism and code of conduct which have put the Indian law-making machinery in bad light for the world.

"The crypto market which was illegal some years back has now risked over Rs 6 lakh crore worth of money from Indians investors. The biggest question now is: How is the government planning to levy and recover tax on money being made by crypto trading exchanges and apps? If it is treated as capital gain then the players get undue benefit and if it is treated as business income, then the whole illegal system turns legal," Gupta elaborated.

There are several serious aspects to the whole crypto scenario in India that need to be addressed fast.

"First, when crypto is spreading like wildfire then why is its regulation delayed. Second, without Parliament-specific approval and amendment in the RBI Act, private currency like crypto cannot be treated as a valid legal tender," argued Gupta.

In the proposed law, if cryptocurrencies are not accepted as legal tender, then how will it be treated as an asset class and who will be its regulator.

"Crypto craze is reaching tier II and III towns and non-regulation of this market of Rs 6 lakh crore size is raising questions on the sovereign authority of government of India. Non-levy of GST in various layers of its transaction and non-imposition of income tax with penalty is causing huge loss to the state and central government revenue," Gupta further stressed.

Crypto platforms, especially WazirX, CoinSwitch Kuber and CoinDCX, have launched ads across platforms, promising big returns on crypto investments, with a thin line titled "Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks," placed at the end of the ads.

A large number of Indians have become victims of such luring advertisement campaigns in the past, which asked them to invest in digital coins.

Currently, the RBI is the nodal agency that is responsible for all issues pertaining to crypto assets in India, thanks to a recent Supreme Court judgment.

"However, we have still not seen effective steps being taken from the statutory authorities to protect consumers from vagaries of crypto-assets and crypto currencies and their sharp volatility," Duggal said.

Also Read: How cryptocurrency has re-wired capitalism

According to a recent report by IT industry's apex body Nasscom, there are more than 15 million retail investors in India investing in the cryptotech space.

A cryptocurrency bill is expected in Parliament's winter session and according to experts, strong mechanisms need to be put up to prevent the innocent citizens from becoming victims of an impending economic disaster, who do not fully understand the legal and policy ramifications of the same.

"Facing a catch-22 situation, India needs stronger laws, not only for the Blockchain-based trading but also for IT and data security, in order to tame the crypto cartels," Gupta stressed.

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