Think for a minute, how many uses can you find for the word ‘use’? Now, think of the uses in the context of cryptocurrencies.
- Bitcoin can be ‘used’ to buy things.
- It can be ‘used’ as a store of value.
- Bitcoin can be ‘used’ for peer to peer transfer of value (money)
- Cryptocurrencies can be ‘used’ to buy and sell more cryptocurrencies
My brain came up with these four, your brain may have more use cases.
Why is this important? Because, today the headline is “India considers banning ‘use’ of cryptocurrencies.
India Mulls banning ‘use’ of Cryptocurrencies
On October 30, 2018 Financial Stability and Development Council (FSDC) held its 19th meeting to review ‘the current global and domestic economic situation and financial sector performance’.
In this meeting, was present the secretary of economic affairs, Mr. Subhash Chandra Garg. The Garg committee comprising of several members from prominent regulatory bodies such as RBI, SEBI was setup in December 2017 to come up with rules to regulate digital currencies.
During the meeting, the Council deliberated on the issues and challenges of Crypto Assets/Currency. Mr Garg briefed the council about the committee’s deliberations “to devise an appropriate legal framework to ban use of private crypto currencies in India” the government’s Press Information Bureau (PIB) said in a release.
The committee was supposed to submit the draft of regulations in July 2018, which has not seen the light of the day and ever since then, these one liner news are all we are left it for our own deliberations of the future of cryptocurrency in India.
Two words are important – ‘Private’ and ‘Use’
The statement may mean there is an eminent ban on something related to cryptocurrencies. But the confusion lies in the words “Use of Private cryptocurrencies”.
What do they mean by “Use of Cryptocurrencies”?
The word ‘use’ may mean that buying, selling, transacting, or its conversion into INR may be banned but not possession itself, according to Crypto Kanoon, a platform engaged in analysis and awareness about legality of cryptocurrencies in India.
Mehul Shah, a cryptocurrency trader and businessman from Mumbai interprets the word ‘use’ as usage of cryptocurrency like fiat or INR he said on twitter.
Coin Crunch India’s telegram group is abuzz with various other interpretations, but we are going to keep it at these two. But it is safe to say, the community is not happy with the new blow.
What are Private Cryptocurrencies?
When we hear private cryptocurrencies, we think of Monero, Zcash, Verge and other cryptocurrencies that offer privacy for the addresses and transactions on the blockchain.
Bitcoin’s ledger is open, anyone will know where and how much Bitcoin is transferred. Ofcourse we are talking about the public addresses. Cryptocurrencies like XMR, ZEC, XVG offer to hide the amount being transferred and the balances on the addresses, hence its private.
The question then is, “Is the government talking about these private cryptocurrencies or something else?”
It is possible that the committee is deliberating over allowing a government backed cryptocurrency to be used freely while all the other cryptocurrencies be banned. A recent report did point in the direction.
What about Mined Cryptocurrencies?
All this while we have been speculating the ban on use of cryptocurrencies But what about the ones you get as a reward for mining? Public blockchains such as Bitcoin, Ethereum, Dash, etc use either Proof of Work or Proof of Stake mining to reward the nodes that confirms the transactions on the network and keeps them running.
You don’t buy these coins, atleast not in the case of PoW. You buy a machine, install a program that mines cryptocurrencies and you get a reward in that particular coin. There are no regulations on cryptocurrency mining yet, and all of the speculative reports around the regulations have pretty much never mentioned mining as well.
I believe, we must sit tight, the news may be bad, but still sit tight and wait for the committee to actually announce the framework. Until it is actually banned, you’re free to trade.
What Happens if India Bans Cryptocurrency?
Let us say that a legal framework is created that makes it illegal to buy sell and even possess cryptocurrencies, what happens then?
Well, our country than stands to lose a lot of job opportunities first. Zebpay has laid of most of their staff and they had over 200 employees. Koinex has 60+ employees. Coindelta, Coindcx, Bitbns, WazirX, Unocoin, Giottus and many other exchanges also have big teams. If the exchanges are to shut down, some employees will be laid off.
But, other than that, the in-geniuses of Indian start up ecosystem will find a way to survive, much like how they survived the RBI’s banking ban. For retail investors such as you and me, we have to move our holdings to private wallets and never sell it until cryptocurrencies are unbanned. Who knows, one Bitcoin maybe worth 50000 USD then.
Here’s another article we wrote specifically on the subject