In the last couple days, two news reports have stated how Indian government is coming up with their own digital currency or a list of “approved” cryptocurrencies that you can keep and the ones you cannot. If you haven’t read them, let us refresh your memory with a couple of screenshots.
There are two possibilities. India can ban cryptocurrencies or India can regulate them. I would like to talk about both.
What if India Bans Cryptocurrency?
Can they do it? Short answer is Yes. But the real question we must ask is, how effectively?
Bitcoin is not like a 500/1000 INR note that can be shunned out of circulation over night. It is a virtual asset that you can hold or send from a digital wallet that requires no supervision or approval from regulators such as banks and governments.
If Indian authorities were to announce a Bitcoin or cryptocurrency ban, there are two things that can happen:
- Users go on a massive sell off fearing regulations. Market crashes in India, perhaps a little impact overseas and exchanges shut trading.
- Users move their cryptocurrency to private wallets from exchanges and never mention about their holdings to anyone.
In both cases, the trading will eventually move underground or international and the government won’t be able to track them.
Indian Exchanges Will Move Out of India and Keep Running
Speaking of Indian exchanges, most of these exchanges now have an overseas office in a crypto friendly country. Some have made it public, some haven’t. To protect the privacy of the exchanges, we will be refraining from sharing these details.
Indian Exchanges just have to follow the example of Huobi and OKex, these Chinese exchanges moved to Hong Kong after the crackdown on cryptocurrency in China earlier this year. They kept the exchange open for their Chinese users who were freely trading, despite a ban in the country.
We have the Supreme Court!
Chances are, you know what I am talking about when I say “Mere Pass Maa Hai”. The famous dialogue from Deewar is apt at this point, just replace “Maa” with Honourable Supreme Court of India.
If the government were to amend a law, which in itself is a tough task if it has to go through parliamentary approval, we can always plea against it in Supreme Court. It will take time, but the law will side by what is right.
Exchanges and cryptocurrency traders are fighting in Supreme Court for the legality of cryptocurrency and the freedom to trade in the digital assets. If a law is passed, we the people will knock on the Supreme Court’s door to counter it.
But this is still based on speculation. The theory behind such a ban is that it can curb money laundering, tax evasion, terrorist funding, etc. But it is all happening with INR, Gold, Benami property and Forex despite laws to regulate them. Bitcoin is more sophisticated than any of these, banning it will only make the miscreants be more careful in getting caught.
The only good that can come from banning cryptocurrencies is that the government protects the banks from losing its business to a Trust-less peer to peer network to an extent. What happens when a villager learns that he can get thousands or lakhs of rupees from his son who is in the US for just less than a dollar for fees?
What if India Regulates Cryptocurrency?
If India launches her own digital currency, and bans everything else – the above mentioned scenario becomes applicable automatically. In addition to that, why would I use a government backed digital currency when I am already using pretty much every cashless avenue I have like cards, e-wallets and UPI?
If India approves of certain cryptocurrencies such as Bitcoin, Ethereum and so on, much like what the SEC of Thailand did, then India is on the line of becoming a liberal governance based economy. India can order crypto exchanges to get special licenses to operate as well and monitor them. There is nothing to fear when you are on the right side of the law.
Regulations are good. They are good because they can help fight the real Ponzi and multi level marketing schemes. On the other hand, traders will become tax compliant, blockchain businesses will be able to operate and issue utility, maybe security tokens to raise funds and bring more innovative products for the world to use.
India is one of the fastest growing economy and embracing public blockchains and easing regulations on crowd funding can actually increase the innovation in our country, in turn giving the much needed boost to the economy.
Never forget that Flipkart is a Singaporean company because the laws in India are not friendly for fast growing startups. So, regulations can be a bad thing too, if they aren’t easy enough for growth.
Killing a pseudonymous, sometimes anonymous, trust-less, decentralised database called blockchain is harder than it sounds. For every country banning bitcoin, there is one embracing it. So, if India decides to ban cryptocurrency, there will be hundreds of ways to bypass the ban. Much like there were ways to bypass RBI diktat.
Coin Crunch is not encouraging players to break the law. But within the caveats of law, I am sure smart entrepreneurs will find a way to keep the trading channels for cryptocurrency open and India may win the battle but eventually lose the war against cryptocurrency.
I am sure the Garg Committee and other entities have considered all of these points and I would only advise our crypto community to pay no heed to unnecessary FUD in media based on unaccredited sources. Let us wait for the regulations or amendments to the law to be announced by the government officially. Until then everything must be taken with a pinch of salt.