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Indian Government’s Carrot on a Stick Strategy for Crypto Traders

Minecraft players will know the ‘Carrot on a stick’ item far too well. The player puts a carrot on a fishing road, saddles a pig and hangs the carrot in front of the pig. The pig then starts reaching for the carrot but never truly catches it as it is moving away from the pig at the same time.

A little different variant is the carrot and a stick. Where a man sits on a horse or a donkey, hangs the carrot in front of the animal and then beats the animal in the back with a stick. The end result is the same. A person is trying to convince the animal that there is a carrot ahead of them to reach, but as they walk towards it, the carrot moves the same distance away from it. An approach, it seems, the government is taking for Indian crypto traders.

The carrot and a stick illustration. Source – Wikipedia

Carrot = Regulations

Indian government is yet to take a stand on regulation of cryptocurrencies. They haven’t banned it. They have discouraged its trade and there is a committee that should have submitted the report before July 15, as per the latest reports.

But, this is not the first time a committee has failed to submit a report that was promised to the crypto enthusiasts of the country. If you look closely, the government has merely shown the people hope and later failed to deliver.

  • In April, 2017 the Finance Ministry announced an interdisciplinary committee was setup to review virtual currencies. Kirit Somaiya, a member of parliament raised the issue in Loksabha and “urged” the government to look into cryptocurrencies on April 05, 2017. The committee was formed later. Until now, the report of the committee has not been made public.
  • In February, 2018, the Finance Minister of India in his budget speech said Bitcoin is not a legal tender and later announced an interdisciplinary committee will be setup to review VCs. Two days later on Feb 03, 2018, secretary of the Dept. of Economic Affairs, Subhash Chandra Garg told reporters that the committee will finalise a framework before the end of this year (March 31, 2018). 
  • A whole quarter after the initial deadline, Mr. Garg told ETnow that the draft is “almost” ready and will be presented by the end of first two weeks of July. Today is July 18, 2018. There has been no announcements yet. Update: A new report claims the regulations will be announced by the end of the year.
  • Not just the government but also the Reserve Bank of India dangled its own carrot. The RBI setup a team to report on feasibility of a central bank digital currency. The report was to be submitted before June 30, 2018. On August 2, RBI responded to our RTI “The report has been submitted”

The office of the secretary of DEA has denied to speak with media when Coin Crunch approached to ask questions. The RBI is non responsive and an RTI filed to know the status of the RBI’s central bank digital currency proposal remains unanswered as of today.

On the other hand, crypto traders and exchanges are bearing the blunt of RBI’s decision to ban the banks from doing business with Crypto exchanges. Volumes have subsided in the Indian market as only a handful exchanges offer INR deposit and withdrawal service.

On July 20, 2018 the Supreme court will be hearing arguments from petitioners wanting to ban or regulate cryptocurrencies as all cases have been tagged together. The apex court has asked for the Attorney General to be present for the hearing as well. The case will be a fascinating one as the supreme court will hear lawyers arguing to ban crypto, to regulate crypto, to justify RBI’s move and to negate the RBI’s decision, all of them together.

It almost looks like everyone is merely trying to wait for the other one to make a move. I wouldn’t be surprised if there will be no arguments in Supreme court this Friday. But as it goes with carrots, you have to keep your hopes high and keep running to catch it.

What do you think the government should do? Let us know in the comments below

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