“Indian Government is never going to regulate crypto”, a telegram user texts, the message riddled with angry emojis. “They don’t understand that Blockchain without cryptocurrency is useless”, chimed in yet another user.
It all started when Bitcoin India’s telegram channel published the following quote from the secretary of the department of economic affairs, Mr. Subhash Chandra Garg.
The banking regulator has come out with regulations. It has debarred the banks from dealing with anybody or any aspect of cryptocurrencies. We don’t believe the cryptocurrencies to be currencies at all. We have issued several advisories for people to not deal with it. Because it is risky, it’s a Ponzi kind of scheme. Therefore, cryptocurrencies are banned in this countryDEA Secretary Subhash Chandra Garg
In a report published by DNA, Garg was also quoted saying, “the currency is totally banned, the committee is discussing its other usage and how it can be mainstreamed in India”. Apparently, according to the report, government wants to introduce Crypto tokens but not Cryptocurrencies. Crypto tokens can and should only be bought using physical money. Unlike tokens, cryptocurrencies can be generated by mining, such as Bitcoin or Ethereum and government is not happy about citizens being able to use digital money other than the INR.
Even as Garg’s remarks are yet to fade from memory, a new report from quartz yesterday dealt another blow to the damping confidence of crypto enthusiasts in India. It says, cryptocurrency regulations not likely to be announced until the end of the year.
The anonymous official quoted in the report says the Garg-committee, setup to submit a proposal for crypto regulations want to ‘Milk’ blockchain, but not Cryptocurrencies for financial transactions. The report by the committee was due in July this year but looks like the citizens were yet again handed a carrot on the stick.
Blockchain Vs Cryptocurrency
Both reports have one thing is common. Government does not like Bitcoin but they seem to have no problem with what makes Bitcoin’s existence relevant – Blockchain. Yes, I know Satoshi never called it Blockchain, yes it’s a distributed ledger technology, yes there are permissioned Blockchains, but it all started with Bitcoin.
“Tokens are the fuel(gas) for Blockchain system” says Rakesh Yadav, CTO of Koinex exchange. “Tokens are integral part of public blockchain Consensus protocols, almost all the consensus algorithms have reward and penalty mechanism which helps to ensure that network contributors(miners) are incentivised to behave properly.”
To simplify, if you aren’t incentivised with tokens or coins, why would you spend your resources on mining or confirming transactions? If you behave improperly, you can be penalised and you can lose your tokens.
On the other hand, Private Blockchains are just databases on a distributed network. It is cost effective, but mostly unnecessary. Yet, the officials are trying hard to separate cryptocurrencies from blockchain, says the anonymous source of quartz.
Risky = Ponzi
Government officials such as Subhash Garg called Bitcoin and other cryptocurrencies ‘Ponzi kind of scheme’. If they are a Ponzi, why even consider other uses of it?
The investment in cryptocurrency was, is and will be risky. But risk is associated with everything, even Mutual funds, the supposed ‘Sahi Hai’ investment. No matter how many campaigns are done for Mutual Funds, the warning ‘Mutual fund Investments are subject to market risks’ will always be added.
Anyone who have invested time and energy into researching Cryptocurrencies will know that it can essentially break the bank’s business. I can now transfer Crores of Rupees for fees less than a Dollar to anywhere in the world. I keep my money safe with me, I do not need a middleman.
That being said, a lot of public blockchains and projects built on them serve no great purpose, so does businesses like PayTM and Airtel Payments Banks, who tried to illegally acquire customers without consent. But they are innovating and they wouldn’t have to resort to these measures only if the government bodies eased off the regulations. A government must support innovation not knock it down because they don’t understand it.
Globally cryptocurrencies are regulated in many developed countries, but the same is being compared to a Ponzi Scheme by authorities. If this isn’t sad, what is?
To summarise, here’s how the Government of India’s committee is looking at regulating Cryptocurrency:
- Cannot allow it to be used for payments. Then? Asset? They are still deciding.
- Crypto tokens are fine for loyalty rewards. *cough* Zagg is building cryptocurrency for the world and crypto tokens for India.
- Blockchain is good, Crypto is bad. Is it though? Is it?
- Crypto is Banned. Is it though? Is it? Where is the memo?
- Everything was ready in June to be published in July, but now regulations’ draft will be published by the end of the year. Will it though? Will it?
Bonus: It was also Subhash Garg who said that citizens can transfer crypto to each other and exchange for cash.
I want to end this article by asking you to read something we wrote before about the Carrot on a stick handed to us by the Government, hope you enjoy it.