It is expected from the Indian government that it will propose a bill which would grant six months of liquidation for holdings of cryptocurrency. Failure to do so leads to fines, and even up to ten years in prison are required by one government committee.
The Indian government is well known not to be a fan of cryptocurrencies. But the country’s toughest policy would still be a blanket ban. The bill is expected to criminalize ownership, issuance, mining and trading of cryptocurrencies, as reported by Aftab Ahmed and Nupur Anand in Reuters. And to say that this proposal could not have been worse is no exaggeration.
Your wallet voting
Recently, Bitcoin reached $61,000 in meteoric height. But what was going on behind the scenes could be the true success story. Namely, both large investors and the masses have been drawn into Bitcoin’s attention. It’s not only in the hands of a few technology enthusiasts and maximalists. Companies such as Tesla, MicroStrategy and Square took long-term positions and Bitcoin is increasingly used by Wall Street for speculative investment.
These companies have provided cryptocurrencies with “institutional credibility.” Enthusiasts have put their money where their mouth is for years, but now money comes in the form of billions of dollars. And people take note of this. The estimated investment in cryptocurrencies has been made in India alone by 8 million people.
Briefly, people vote with their wallets and show that cryptocurrencies have a promising future for them. Removing the rug from beneath them would punish Indian people for their entrepreneurial spirit. Furthermore, it will not be without cost to undermine the network of investors and enterprises built in the last decade.
Voting with Their Feet
The hostility of the government has already motivated some people to go to green pastures.
Rahul Jain told Economic Times that “any Indian law that criminalizes crypto will not affect us,” his company moved to Estonia. And others do the same thing. Sathvik Vishwanath said, “There is no point keeping our business in India if the bill is passed.”
The risk appears to be too high to be ignored, but the chances of cryptocurrencies are too high to give up.
Fortunately, not in this struggle alone were private citizens. Just one year ago, the Supreme Court of India overthrew the attempt of the Reserve Bank of India to prohibit the trading of banks in cryptocurrencies. The court decided upon the motion of the Reserve Bank after weighing the arguments.
Unfortunately the incentives of the Reserve Bank have not been a mystery: since 2017, they have planned to launch a digital central bank of their own. Actually, the launch of a digital currency central bank is the other half of the proposed ban.
The Indian Government is of the opinion that the easiest way to eliminate competition would be through an open ban.
Indeed, a recent report from the Reserve Bank noted that digital currencies in the central bank are attractive because they “create individual anonymity, monitor transactions, and pump helicopter money into the central bank.” While cryptocurrencies were innovating to serve users, it appears to be designed to serve the government through this digital currency. It might be difficult to sell without a ban on alternatives.
The legislators are wise to take note of the world around them as the formal announcement of the proposal approaches. Cryptocurrencies were never more popular and with every day they continue to break into the mainstream.
A blanket ban would be a misguided decision in 2021.
It is worth welcoming, not penalizing, currency competition. The people have spoken and want to see this technology’s future.
If the Indian government wants to start the digital currency of the central bank, let it promote adoption by making it the most attractive currency on the market––not by prohibiting and forcing competition to use it.