What’s at Stake for Crypto in India As the World’s Largest Democracy Is in the Midst of Its National Election?

The Indian parliamentary elections in 2024 are unlikely to bring about any immediate changes to the country’s cryptocurrency regulations. The existing stringent policies are anticipated to remain in place during this term.

In simple terms, the country with the largest population and the swiftly expanding economy began holding its elections this month, concluding on June 4, 2024. According to some business experts who spoke to CoinDesk, the upcoming legislative body is not anticipated to bring any shifts in crypto regulations following the elections, meaning the current restrictive policies towards digital assets will persist for the time being.

Narendra Modi, aged 73, intends to serve a third consecutive five-year term as India’s Prime Minister, representing the Bharatiya Janta Party (BJP). According to polls conducted before the elections, he is heavily favored to secure another victory.

With his presumed leadership, the Indian National Congress (INC), the primary opposition party along with approximately forty regional parties, have joined forces to create an alliance named I.N.D.I.A (Indian National Developmental Inclusive Alliance), aiming to challenge him.

In simple terms, there are 543 seats up for grabs in the lower house of India’s Parliament, called the Lok Sabha. The political group that secures the greatest number of these seats has the authority to designate the nation’s prime minister and establish a ruling administration.

Crypto as an election issue

The importance of cryptocurrencies as an election topic is insignificant or barely noticeable. For most voters, Web3 technology remains unfamiliar and complex. India’s new crypto tax law, imposing a 1% deduction on each transaction, may not have a significant impact on this year’s election outcomes.

Topics like insufficient employment opportunities, controversies surrounding a Hindu-nationalist approach contrary to the constitutional secularism, perceived discrimination against minorities, the significance of electoral bonds, institutional autonomy, and agricultural policies have taken center stage in media discussions, effectively pushing crypto as a political concern aside.

“According to Kiran Vivekananda, Chief Public Policy officer at CoinDCX, one of India’s leading cryptocurrency exchanges, socio-political matters continue to dominate Indian elections. However, technology is gradually gaining importance, primarily in the context of establishing tech industries in India and creating employment opportunities.”

Vivekananda had faith that the new administration would collaborate more intimately with businesses to grasp their hurdles, propose remedies, and safeguard citizens’ welfare. Nevertheless, some businesspeople in India’s crypto sector hold the view that stronger actions are necessary from their industry itself.

“According to Ashish Khandelwal, founder of Anq, a digital banking platform and a key figure in interacting with lawmakers, recent advancements in the U.S. prove that cryptocurrencies can emerge as significant topics in political discourse, shaping policies and swaying voter decisions. To mimic this trend in the U.S., the Indian crypto sector should emphasize how this technology goes beyond mere investment prospects and bring attention to its practical advantages.”

No crypto-related promises

The major political parties in India, including the BJP and INC, haven’t explicitly mentioned cryptocurrencies, blockchain, or Web3 in their election manifestos. However, this doesn’t necessarily mean they have no plans for the crypto ecosystem. Indian authorities and political figures often use indirect language when discussing crypto-related matters.

The BJP’s manifesto pledged that they will teach senior citizens about digital safety to prevent fraud, harshly deal with individuals endangering our country’s digital security, and construct “Digital Public Facilities” to eliminate information disparity within agriculture.

The Congress Party, also known as INC, announced that farmers would be able to submit their produce sale-and-purchase agreements online via a “digital platform,” while addressing cybersecurity concerns that could potentially jeopardize India’s digital financial system.

During Modi’s second term, his crypto policies have been marked by significant taxes and regulations. For instance, there is a 30% tax on profits gained from selling digital assets, with no option to offset losses. Additionally, a 1% tax is deducted at the source for each transaction, and all exchanges must register with India’s anti-money laundering and terrorist financing agency. These measures and enforcement actions have severely impacted the crypto industry.

The recent surge in cryptocurrency prices and the Indian government’s decision to ban offshore exchanges, following recommendations from crypto policy advisors, seem to provide temporary relief for the crypto industry.

The Modi administration has taken a tepid approach towards cryptocurrencies, implementing a haphazard set of rules according to Mohit Chawdhry, a researcher at the Esya Centre Think Tank who has extensively studied the effects of these crypto regulations on the industry.

An opposition party with limited influence in crypto policy has yet to present a clear stance on the issue. At the moment, their efforts are primarily focused on trying to survive politically against the formidable force of Prime Minister Modi.

No major changes in the near-term

No matter what happens with Parliament, India’s Web3 policies are likely to stay the same for the time being.

If Modi is re-elected, it’s reasonable to assume that his political agenda will continue, with cryptocurrency not being a pressing concern at the outset. The Indian government has given no clear signals that they plan to change their stance on crypto regulation once they are back in office.

If the opposition alliance were to win instead, the current coalition government might have different focus areas. The coalition members have not shared their plans regarding cryptocurrency policies yet.

The best case scenario for a change in India’s crypto policy is around the end of 2024,

A source close to the crypto regulation process within the government shared this information with CoinDesk, despite not being permitted to talk to the media.

The reason for this delay isn’t because of any particular policies that could change or be implemented – instead, it takes the government several months to assume power once election outcomes are declared, which is expected to happen in six weeks.

According to Chawdhry from the Esya Centre, the Indian government under Modi doesn’t seem overly interested in creating a comprehensive regulatory framework for digital assets. Instead, it seems that other burgeoning tech areas like artificial intelligence and extended reality are where policymakers are placing their focus.

More recently, Finance Minister Nirmala Sitharaman expressed some uncertainty regarding cryptocurrencies. She noted that while trading of crypto assets has been permissible, the Indian government hasn’t implemented regulations for them up until now. The minister did not indicate any plans to alter this approach in the near future.

Some change by 2025

The past few years of the Modi government indicate changes will come.

Under the leadership of the Modi government in 2023, India played a significant role in establishing a unified global crypto policy during its presidency of the Group of 20. India advocated strongly for this issue and successfully convinced major economies to adopt a common set of guidelines.

India has also purportedly achieved its ambitions with the digital rupee.

“According to Tanvi Ratna, founder and CEO of Policy 4.0, a rising tech policy institute, the crypto regulatory process is expected to significantly speed up during the current term of the Modi administration.”

“Ratna indicated that the Indian government’s strategy will closely align with the G20 framework, which was established during India’s leadership. It’s important to note that India’s cryptocurrency policy is expected to develop in tandem with the rollout and implementation of the eRupee. The next five years in India are predicted to be quite active and transformative.”