Regulating the unregulated:India’s crypto journey amid global developments
By Gaurav Dahake
As we traverse the middle of the year 2023, one truth stands undeniably clear – the world of cryptocurrency has come of age. The once daunting boundaries of currency are fading fast, replaced by an intriguing new landscape of digital assets, all playing a significant role in the redefinition of global economies.
| Year | Illicit Activity as a Total Volume of crypto transactions (%) |
| 2017 | 0.86% |
| 2018 | 0.49% |
| 2019 | 1.90% |
| 2020 | 0.43% |
| 2021 | 0.12% |
| 2022 | 0.24% |
The recently released Chainalysis 2023 Crypto Crime Report and the 2022 Geography of Cryptocurrency Report further underline the tangible benefits of robust crypto regulation, especially in mitigating illicit activities. These reports reflect a clear inverse relationship between effective regulation and unlawful activities in the crypto sphere. Overall illicit activity, measured as a percentage of total crypto transactions, has dropped significantly over the years – from 0.86% in 2017 to a mere 0.24% in 2022. The presence of regulatory measures significantly reduces instances of misuse, reinforcing the necessity for such structures in the crypto landscape.
The last five years have seen a paradigm shift, one that has seen the rise of not just cryptocurrencies but also comprehensive legislative frameworks that seek to define their existence and usage.Let’s unravel the recent key developments in the global crypto-landscape to help shape India’s approach towards harnessing the potential of cryptocurrencies.
United States: The Need for Clarity
In the United States, we’ve seen the SEC’s determination to tighten regulations, particularly after the recent collapse of the FTX. The need for an effective regulatory center has never been stronger, especially as established exchanges like Coinbase, Kraken, and Bittrex grapple with confusing regulations. This scenario underscores the need for transparent policies and a robust center for regulation, but it also signals the importance of geographic diversification for the survival of crypto exchanges.
Latin America: Trailblazing Digital Adoption
A far cry from the stringent regulatory environment in the US, Latin America is pioneering digital money adoption. Central Bank Digital Currencies (CBDCs) and cryptocurrencies are no longer abstract concepts but tangible mechanisms enabling financial inclusion and protecting against macroeconomic volatility. El Salvador’s granting of legal tender status to Bitcoin signifies a remarkable precedent – turning the theoretical benefits of digital assets into practical, economic solutions.
European Union: Standardization is Key
The European Union has been assertive, making significant strides towards standardizing cryptocurrency rules. Harmonized regulations among its members would result in simpler, clearer rules for cryptocurrency exchanges and custodian wallet providers, laying a solid foundation for market integrity, investor protection, and compliance.
Asia and the Middle East: A Mixed Bag
Asia showcases diverse attitudes towards crypto. Singapore, the UAE, and Japan have become prominent hubs for crypto activity, underpinned by strong regulatory structures. China, however, has swung the other way, implementing stringent bans that have repercussions for its crypto community. Yet, this diversity is not a weakness but a testament to the adaptive nature of digital assets and their various applications across different economic landscapes.
India: Pioneering the Uncharted Path
Navigating these global developments, India has been cautiously exploring its stance on crypto-regulation. The question of whether cryptocurrencies should be classified as commodities or currencies remains unanswered. Our approach has always tilted towards prioritizing investor protection and financial stability.
However, India’s future with cryptocurrency needs to reflect more than just caution. It should echo the innovation and opportunities that digital assets offer. We are at a juncture where we can learn from the world, from the ‘confusing regulations’ of the US to the ‘inclusive finance’ model of Latin America, and even the ‘standardization’ approach of the EU.
Crypto-regulations should no longer be a topic on the sidelines, but rather a priority at forums like the G20. It’s crucial that we provide an adaptable, transparent framework that not only safeguards investors but also cultivates innovation, growth, and broadens our financial ecosystem.
| Region | Percentage share in global crypto trading volume | Year-On-Year growth in crypto transaction volume 2020 vs 2021 (by region) |
| Latin America | 9.3% | 40% |
| North America | 19% | 36% |
| European Union | 21.9% | 15% |
| Central and Southern Asia | 15.8% | 35% |
| Eastern Asia | 12.9% | 4% |
A look at geographical trends reveals another compelling narrative. Regions that have embraced crypto-friendly regulatory frameworks like North America and the EU, which contribute 19% and 21.9% respectively to the global crypto trading volume, also exhibit lower rates of illicit transactions. On the flip side, regions like Latin America and Asia, with burgeoning crypto transaction volumes, signify the potential for further reduction in illicit activities with streamlined regulation.
The evidence is crystal clear: with careful regulation, the crypto domain can flourish while minimizing the risks. It’s an encouraging signal for India as we strive to frame our own cryptocurrency regulation policies. By learning from these global trends, India can build a secure, transparent, and thriving crypto ecosystem. We should consider regulation not as a hurdle but a catalyst that will unleash the true potential of digital assets and propel us into the new era of digital finance.
Looking Ahead: Embracing the Future
As India’s largest cryptocurrency exchange, we at BitBNS believe in the transformative power of digital assets. We’re dedicated to bringing the benefits of this new asset class to every Indian, by providing a secure, transparent platform for their crypto-journey. The global popularity of cryptocurrencies is a call for India to create a stable, forward-looking regulatory environment. We must embrace the digital asset era by delivering regulations that are clear, adaptable, and put us on the right side of history. The future of finance is here, and it’s digital. It’s time we tuned our regulatory frameworks to its frequency. Let’s enable an inclusive financial ecosystem that empowers every individual and ushers in a new era of economic growth and innovation.
The author is CEO,co-founder, BitBNS
