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What Subhash Chandra Garg Got Wrong About Cryptocurrencies!

In a personal blog, India’s former Finance secretary Subhash Chandra Garg writes about a future where digital sovereign currency may become a norm while “private” cryptocurrencies like Bitcoin will meet doom.

Almost everyone in the Crypto or Blockchain community of India have heard of Subhash Chandra Garg. He chaired an inter disciplinary committee setup by the government of India that published a report last July, recommending a complete ban on Cryptocurrencies in India.

On Thursday, Garg published a blogpost, titled “Currencies will be digital; Crypto-currencies will not survive”. Several Crypto enthusiasts took it to twitter to signal against the stance he took. But alas, the man never replied to any. Social media can be such a wonderful tool for debate and these officials use it like a one-way broadcast, but that’s a topic for another day. One more topic for another day could be why is Subhash Chandra Garg still using Blogger?

Our guest contributor Paras Lehna decided to refute some of the points in the blog, and here they are:

Garg: Is it currency or a commodity?

Paras: It’s a commodity which can be used as a currency. No one is forcing central banks to declare Bitcoin as an official currency. If two people mutually want to use a barter system, they should be able to.

Let people bear the risks or profit generated from holding crypto. If they lose, they won’t be blaming the government or central bank. Mutual Funds put up disclaimers about the risks, and they sometimes fail hard. Do central banks compensate users for losing money put into Mutual Funds or stocks?

The risk-to-reward ratio is higher in crypto but it’s our money and we should be able to decide where to invest. Besides being a valuable commodity (the supply is limited plus the intrinsic value is the computation power used to mine the coin), it has features to become a global currency given how it solves double-spending, one-point of failure, decentralized ledger, zero downtime, cross-border transactions, offline wallets and negligible fees. No one is stopping RBI to help people do KYCs and regulate the flow.

The PayTM wallet does the same thing. Is PayTM money a commodity or a currency? People know that it can never be the real money but still use it because of its features, ease-of-use and acceptance rate. Gold prices also fluctuate among markets and I don’t see anything else than demand/supply to govern those either. Why banks provide loans against gold as collateral when they already realize that its value can change?

Garg: How do you maintain the value of a freely supply crypto-currency?

Paras: Value is derived by the market dynamics. Crypto-currencies do not fear centralized currencies but the central banks are being uncomfortable about crypto assets. That shows how superior crypto-currencies can be, because it in a way puts people’s money in their own hands.

The private players don’t control the prices. It’s no different than how a stock pumps and dumps. Satoshi talked nothing about the prices of Bitcoin in his paper. The underlying concept of Bitcoin was made for digital currency with no bounds. The rewards attract buyers and miners who increase the difficulty of the network which brings down the reward. The demand and supply of the market than plays another role. For a country like India, the fiat like ₹1 always equals ₹1 irrespective of how much $ it is. Same goes for crypto – 1 BTC is always 1 BTC. If you are willing to convert it among different currencies, you refer the conversion rates like other fiat currencies. Simple as that.

Garg: Can currency be issued by a private entity?

Paras: Bitcoin and many other Cryptocurrencies are decentralized, far from being issued by private entities. If an Ola or PayTM is offering cashback and discounts in their own points, that is a private entity printing money. Sure, at any point, that value is backed by fiat money, issued by a central bank, but we have seen enough scams to know how the fiat values on books can be manipulated. Can you actually manipulate a decentralized ledger? The answer is NO.

If a company tomorrow starts making its own cryptocurrency, perhaps it will fail. But to be so ignorant to compare the boom of crypto with bubble and calling for it to eventually fail shows that the past decade of Bitcoin or Ether or even XRP is only the beginning.

Furthermore, Garg’s subtopics “Money is fast becoming digital” and “Final switch over to digital money”, actually support the use-cases of cryptos like Bitcoin. They are right, there could be inventions to solve most of the issues with fiat and you may not need crypto as alternatives. But why are wallets like PayTM and PhonePe growing when Central Bank has more resources and control to issue similar solutions? They are also owned by private entities. Google Pay, owned by another private entity, is the only wallet to register profits besides other methods. Not everything issued by the government is the best. We certainly owe something to all of those private entities. One must appreciate the innovation behind the crypto-currencies. All these articles actually hint how much the central authorities are scared about their adoption. Don’t worry, we won’t be harsh on you.

About Paras Lehana: Paras works as a Development Engineer for Auto-Suggest at IndiaMART. Paras is a strong believer of Blockchain and had even filed a PIL against RBI notice of April 2018 in Haryana & Punjab High Court. He remains active in the Indian crypto community including lawyers, journalists and entrepreneurs and educating India and the world about Blockchain. Besides this, a photographer, traveler and Badminton player.  

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