The Ministry of Commerce and Industry, Government of India, on Friday said in a written response to a question in Rajya Sabha that the government does not maintain information on the exit of crypto start-ups from India.
Minister of State for Commerce and Industry Som Prakash said that the Reserve Bank of India (RBI) has cautioned users and traders of virtual currencies that associating with crypto start-ups have economic, legal, customer protection, and security risks.
Notably, Since July 2018, several firms focused on Blockchain and cryptocurrency technology are reportedly either deciding to register abroad, or are shutting down their operations in India. Bloomberg estimates that as of March 2022, between 30 and 50 cryptocurrency companies have moved their operations elsewhere.
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Reggie Raghav Jerath, CEO of Dubai-based Blockchain company, Gather Network said that cryptocurrency start-ups were frequently in constant attention in India.
Notably, the RBI had also in a circular dated April 6, 2018, prohibited all regulated banks from holding or facilitating cryptocurrency transactions, thus leaving crypto start-ups in the cold.
He said that it’s a bit difficult for crypto start-ups to trade in India in view of the legal and policy uncertainties and obstacles.
Overall, the Government of India had informed Parliament on July 20 that 72,993 start-ups were registered in India over the past six years, which had generated about 7.68 lakh jobs over the period.
Some crypto industry experts believe that cryptocurrency start-ups that provide financial services, including trading, banking, and investing have not received government backing due to the RBI’s conservative viewpoint on the issue.
Such a companies have chosen to shift their headquarters “symbolically” to Dubai, Singapore, and the United States, but their ground team have continued their operations in India to support billion of Indians.
“Start-ups developing on decentralised Blockchain, non-fungible tokens (NFTs), and the Web 3 ecosystem continue to expand, as the government has shown positive support for Blockchain technology and innovative use case beyond cryptocurrency,” says Gaurav Mehta, founder of Catax, a crypto taxation, auditing, and forensics start-up.
Meanwhile, Vikram Subburaj, CEO, Giottus Crypto Platform said that it is good to see questions being raised in Parliament about brain drain and potential start-ups moving out of India owing to uncertainty in crypto regulations.
“We hope this issue is taken up frequently up and proactive discussions happen to help build a healthy Web 3.0 ecosystem in India,” he said.
Avinash Shekhar, CEO, ZebPay, however, said that apart from detailing the RBI’s stance on virtual currencies, “the Ministry of Commerce and Industry’s statement regarding the exit of crypto start-ups from India hasn’t addressed key elements on the questions raised. Thus, it would be beneficial to understand the impact of crypto start-ups leaving the country.”
Some experts have also pointed out that the government and the RBI seem to be worried about the bad impact of cryptocurrencies on the Indian economy, although these concerns are not completely justified. On the contrary, virtual currencies can provide new impetus to growth in a number of different ways, be it taxes, employment, or social security.
“The need of the hour is to promote the use of cryptocurrencies, as these can very well open up a new stream of revenue for the central government. The push to establish a cryptocurrency ecosystem in the country can result in enormous job opportunities across the value chain of the ecosystem,” says Tushar, co-founder and CEO, FiEx, a crypto platform.
Last week, Union Minister of Finance Nirmala Sitharaman had informed Parliament that the RBI has expressed concerns on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of the country. Therefore, the “RBI has recommended for the framing of legislation on this sector. The RBI is of the view that cryptocurrencies should be prohibited,” she had said.
The recent development occurs at a time when cryptocurrency exchanges are battling decreased volumes brought on by hefty taxes in addition to the unfavourable market conditions around the world.
