By Tsering Namgyal
The news that the Indian government is once again planning to ban Bitcoin and cryptocurrencies in India has Indian crypto entrepreneurs and investors on tenterhooks.
The Reserve Bank of India governor has said that they have “major concerns” about crypto due to its potential implications on financial stability. This is not the first time that the RBI has expressed its views on cryptos. It had imposed a “banking ban” on cryptos in 2018 only to be struck down by the Supreme Court after the ruling was challenged by an alliance of crypto business owners.
Taking a cue from other central banks such as China’s, RBI governor Shaktikanta Das said that the RBI is also getting ready to launch its own digital currency. He had said that he has concerns about cryptocurrencies and that he has conveyed them to the central government.
This comes at a time when the Indian government is ready to table a bill – the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 – in the parliament that will propose a ban on crypto-assets such as Bitcoin in India. Crypto entrepreneurs are not amused. Nischal Shetty, chief executive officers of one of India’s largest crypto exchanges Wazir Z, likened the potential ban on Bitcoin in India akin to banning the Internet and has said it will “set India back by years.” He believes that the “crypto industry is open to being regulated, but a blanket ban is something that will harm the entire country’s financial and technology ecosystem.” He believes a positive regulation will help job creations and generate tax revenue for the government. At the opposite end of the spectrum are investors like billionaire Rakesh Jhunjhunwala, who told journalists that the governments should “step in and ban Bitcoin”, which he said is the “speculation of the highest order.” He said he would not buy Bitcoin even for “five dollars.”
Bitcoin has been in the limelight after it broke the psychological barrier of $50,000 after Elon Musk said his electric vehicle company Tesla has bought $1.5 billion worth of Bitcoins and Tesla may even begin accepting Bitcoins in the future. However, the price of Bitcoin has undergone correction after Musk expressed concerns about the valuation of cryptocurrencies.
Such volatility is expected with unregulated digital currencies like Bitcoin where pessimists and optimists battle it out daily. On the one hand, there are big Wall Street hedge funds such as Skybridge capital and traditional firms like Fidelity and BNY Mellon are embracing Bitcoin, highlighting how the digital currency is slowly going mainstream. But there also skeptics like Nouriel Roubini, aka Dr. Doom, who told Yahoo Finance that Bitcoin is useless and recent price surge is due to manipulation by select investors.
The statements by the likes of Roubini are fueling fears that the governments might soon come out of draconian regulations governing Bitcoin. HK, for instance, has said that it will bar retail investors from trading or owning the cryptocurrencies. Clearly, many countries are looking at ways to regulate Bitcoin and India is no exception. While countries especially in Asia are quite skeptical about Bitcoin, the central banks are keen on rolling out their blockchain-based digital currencies. Chinese central bank, the People’s Bank of China, is already conducting pilot runs of their own digital currency. It is also not surprising that the Indian central bank, the Reserve Bank of India, is also mulling issuing its own currency, though it might take a long time for such a digital currency to come to fruition.
We believe that sound regulation rather than a complete ban on Bitcoin will serve Indians better as it has been taken up by a large number of tech-savvy and aspirational younger generation as traditional jobs dry up. If the government decides to impose a blanket ban on Bitcoin, it will drive the industry underground and create a thriving black market, which will provide a logical home for all kinds of illicit transactions from money laundering to terror financing. In the final analysis, a sound regulation, including perhaps a tax on Bitcoin transactions proposed by many other countries like Korea, will help the government get revenue in its coffers, without stifling innovation in the blockchain industry, the technology behind the Bitcoin which the government actually wants to promote.