Web3, Crypto are Future of Internet, but Lack of Regulations Can Stir Chaos: IT Minister Rajeev Chandrasekhar

Authorities in India seem to be warming up to the crypto sector, as we get closer to December when India's G20 Presidency will conclude, hopefully with a detailed set of regulations to govern the sector. Rajeev Chandrasekhar, the Union Minister of State for Electronics and Information Technology, has acknowledged that crypto and Web3 are indeed, elements of the next generation of Internet. Having said that, the minister did add that rules and regulations are most needed to govern the space to make it safe for everybody to use and engage with.

Chandrasekhar, 59, was speaking on a podcast hosted by Indian YouTuber Ranveer Allahbadia when he said that the topic of cryptocurrencies has come up for discussion several times among the policy makers of India.

“Crypto, Web3, and Blockchain we cannot fight because it is the inevitable future of the Internet,” he said while emphasising on the utmost need for regulations in the sector.

As per the IT minister, crypto and Web3 without a guard have the capability of creating chaos and has a scope for misuse by notorious elements.

“On crypto, while everybody loves the technology, we think that the issue of INR to dollar conversions, that whole fungibility, exchange, and money transfer needs to be governed by some bond. And unfortunately, in India what happened, as well in the US, billions of dollars have been lost with the (industry) meltdown,” Chandrasekhar said, notably referring to the collapse of FTX and Terra last year, that left the crypto sector dry for months as investors flocked to safer, more traditional investment options.

FTX, the US-based crypto platform succumbed to liquidity crunch and shook-up the crypto market in November last year, leading to the wipe-off of nearly $200 billion (roughly Rs. 16,40,298 crore) from the market. The drastic reaction from investors who pulled back capital from digital assets, left several crypto firms gasping for breath.

In a December report last year, research firm Glassnode estimated that around 550,000 Bitcoin had left crypto exchanges in 2022. At the time, BTC was trading at $16,858 (roughly Rs. 13.9 lakh) that bought the value of 550,000 to $9.2 billion (roughly Rs. 76,760 crore).

Chandrasekar said, concerns had begun to brew when Indians started looking at Bitcoin and other cryptocurrencies as speculative assets, betting on how their prices would go up or down to churn profits.

“People started saying, how much is BTC today, how much will it be day after tomorrow, instead of saying I want to use BTC to transact my finances. So, when it became a speculative asset class in a bubble, the government had to intervene and say no. And as a matter of fact, the way we (India) approached it way back in March 2022, was the reason why many young Indians saved themselves from the meltdown that happened afterwards,” the minister noted.

In India, crypto profits are taxed by 30 percent, a rule that went live in March last year. In addition, one percent TDS is also deducted at each transaction in order to keep some trace of these largely anonymous fund transfers.

At this point, India is spearheading the formulation of global rules to regulate this volatile digital asset space as the President of the G20 group. Clarity on the situation is expected by December this year.

“Crypto is a great area, I encourage innovations to continue there – but it certainly needs some global rules before it could be widely used,” Chandrasekar added.