Yesterday, a hot-headlined article spread like wildfire in the traditional media claiming that holding and trading in cryptocurrencies could land people in jail for 10 years. It is yet to be confirmed by any source from the government but the article portrays it to be official. Garg Committee has yet to release any official draft or statement.
According to this draft bill, holding, mining, and trading of cryptocurrencies could be a “cognizable and non-bailable offense”. It proposes a 10-year jail and a 90 day period for everyone to purge their crypto assets. Lastly, it proposes the creation of official currency, digital Rupee.
However, on June 4, RBI officially denied its involvement or knowledge of a draft government bill.
Implications of the bill
While the Indian governments are known to be conservative in the adoption of technology and wild on censorship with various bans from porn to Tiktok, it is important to understand the implications of this. Here are some of the implications that I could think about:
No effect on the global market
I remember the upheaval when China banned crypto mining and trading in 2017. The market took it seriously. Today, the market paid no heed to seemingly big news for Indian traders. This is because the news has a very low probability of materializing and Bitcoin and other crypto assets have become so widely accepted that it is virtually impossible for the Indian government to ban it.
In league with Bangladesh, Pakistan and Nepal
If this bill is passed, we will be in a league of the world’s most innovation-stifled nations whereas most developed countries in the world have already embraced crypto assets and have even started collecting taxes in crypto.
Tech companies will lose out
Indian tech companies are already moving out to Singapore, Malta, and Canada. While traditional powerhouses like the New York Stock Exchange, Microsoft, Starbucks are planning to create new crypto exchanges within the evolving legal framework, Indian tech companies will either move out or lose out.
This is a corollary of the previous point. An example of the Indian team behind the much talked about Binance IEO Matic cannot be an entity registered in India because they may face jail sentences for their disruptive innovations. The government should be thinking about how to attract these brilliant entrepreneurs who built a company with the market capitalization of $51 million as per current valuation. Instead, with such bills, they are being encouraged to move out of India.
India will lose out on taxes
Most countries have classified crypto assets in a way that they could tax the gains. This, combined with the fact that hundreds of millions of dollars worth of corporate revenues could have been taxed by the government, this will turn out to be a big loss. The current market capitalization of the crypto industry is over $250 billion. Missing a piece of this pie is not a wise choice for the finance ministry of a country.
Purging will lead to loss
A government is supposed to protect the interests of its investors. The 90 day period that the bill proposes will lead to panic selling and loss to Indian investors.
Why I think this bill will never see the light of the day
I do not think this bill will ever be passed as a law. Listing a few reasons here:
Sentence of 10 years is outrageous. Famous insider trading cases were also given a prison sentence of a couple of years. Ten years at par with rape and murder laws. There is too much ambiguity around it. Right now this jail sentence was sufficient to generate headlines. We do not know whether this will ever materialize.
No official sources quoted
No official source in the articles that are being circulated, mostly be traditional media, that is still known to misquote news when it comes to Bitcoin and cryptocurrencies.
Millions of Indians hold Bitcoin at present. Many government officials, ministers, celebrities hold crypto. Jailing all of them seems like a pretty impractical thought. They may be forced to sell at the best. But the market doesn’t seem to care.
How should the community respond?
It is important to act wisely in such situations. How should individuals respond?
Educate individuals about the market (the technology, not the price). Get educated yourself first. Read Andreas Antonopoulos’s book.
Reach out to the regulators
Join the campaign started by Nischal Shetty of WazirX here. He tweets to the ministers every day. Retweet that religiously.
Stop being politically correct
Cryptocurrencies are inseparable from blockchain and they are the future. If you do not believe it, sell your tokens and build a blockchain solution.
In the last few years, we saw several bumps when China banned it, the US SEC came after ICOs, companies moved to Malta. This is not an investment for those who do not understand the move from centralized banks to decentralized non-monopolistic currencies. It is a revolution of our times and there will be resistance from the old houses of finance. This is just the beginning of many such expected events. HODL on for a rollercoaster ride or sell crypto.
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