Budget 2021 Expectations: Crypto startups seek legal framework, investment support from FM Sitharaman

• By Kumar Gaurav

Union Budget 2021-22 Expectations for Startups: When it comes to the term ‘cryptocurrency’, it gets difficult for most people to understand because of its technical aspects and use. Thus, in layman’s language, the word ‘cryptocurrency’ can be defined as digital money or virtual currency used by people to make transactions without the involvement of any third party, that is, banks. The transactions made through cryptocurrencies are fully encrypted and secured. This makes them one of the safest investing options. Most of the cryptocurrencies use blockchain technology which gives them full protection from stealing confidential information or counterfeiting by storing transactional information in highly coded blocks. Ether and Bitcoin are the most popular examples of cryptocurrencies.

Was Union Budget 2020 beneficial?

With the advent of rapid digitalisation, more and more people want to invest in cryptocurrencies due to their growth potential and security of transactions. But the question which cannot be overlooked here is that how concerned is the government regarding the growth and use of cryptocurrencies? In Union Budget 2020, Union Finance Minister Nirmala Sitharaman talked about various valuable tax reforms brought up by the government for the dwindling MSME and startup sectors but did not talk about any reform for the cryptocurrency startup industry. This was specifically when some reforms and measures were badly required. Thus, Union Budget 2020 did not prove to be constructive for the cryptocurrency startup industry.

Ray of Hope

On April 6, 2018, the Reserve Bank of India (RBI) imposed a ban on the holding and trading of cryptocurrencies in India. This was because of the outlook that cryptocurrencies could impact the working of the banking system and be used in promoting money laundering and terrorism due to the anonymity of transactions. But, on March 4, 2020, the Supreme Court rescinded the ban imposed by the RBI. This came as a relief for cryptocurrency startups.

With the upliftment of the ban imposed by the central bank of India, many cryptocurrency startups witnessed multiple folds of growth in their users. Numerous crypto startups could raise millions of dollars through the investments made by both Indian and foreign investment firms. International crypto players started investing in the Indian market through mergers and acquisitions. This helped the cryptocurrency sector to gain momentum while fighting against the deadly pandemic.

Challenges

For an industry that runs on high-end technology, it is normal to be surrounded by speculations. For people, where investing in a tangible asset has been the age-old concept, putting money in virtual assets can be a matter of hesitation. Also, the ban and early criticism did cause damage to the credibility of the sector. Like any new concept, even the cryptocurrency sector needs to be given time and support to be able to garner trust and create awareness.

Expectations

The upliftment of the ban has come as a saviour for cryptocurrency startups, and for further growth, the expectations of such startups are high from the Union Budget 2021. The cryptocurrency industry has the absence of a clear regulatory framework, and that is the biggest hurdle that is coming in its path of overall success. Startups want proper legislation regarding investment in cryptocurrencies from the government.

Presently, there are no specific laws for investment in cryptocurrencies which prevents many people from investing in them. A proper legal framework regarding cryptocurrencies will safeguard the interests of buyers and sellers. After the implementation of necessary laws, it will be easier to track the transactions, thus, leading to enhanced safety of transactions. If the government does not come up with such regulations, not only the cryptocurrency industry will suffer, but the country will lag behind the rest of the world in technological growth.

The second expectation of cryptocurrency industry entrepreneurs is funding. The pandemic has led to the bankruptcy of many startups, of which many halted their operations either temporarily or permanently. Thus, entrepreneurs from the cryptocurrency industry are expecting something like grants, loans at low-interest rates, and seed funding from Union Budget 2021 that will help their startups in the early stages and revival. The above-given information leads to the conclusion that for the bloom of cryptocurrency startups, the government needs to bring some laws and assist the startups with funds in the early stages of their business cycles. If not, then the nation would miss some essential opportunities and the larger aim of digital India would not be achieved completely.

Kumar Gaurav is the Founder and CEO of Cashaa. Views expressed are the author’s own.