After RBI Deputy Governor T. Rabi Sankar's statement on advocating a ban on cryptocurrencies in India as they “do not have any intrinsic value and could be worse than Ponzi schemes”, crypto players have strongly come out in defence of cryptocurrencies and the overall ecosystem. They feel that the rise of bitcoin and other digital currencies will have profound impacts on the financial systems around the world and on the practices of central banks and that they have the potential to play an ever significant role in the overall financial system in India.
“Humans have come a long way from the barter system to gold or silver coins to paper money to plastic money to digital payments and now to decentralized currency i.e. cryptocurrency. I feel cryptocurrency is the future and it cannot be stopped. I really respect the government’s decision to tax cryptocurrencies as India being one of the most populated countries has the largest number of crypto users in the world (around 10.07 crore). Hence cryptocurrency can be a very good revenue stream for the government and can also give a huge boost to our economy. We need to understand that cryptocurrency is just one use case of blockchain technology. There can be many other use case scenarios that the government should look into. Countries like El Salvador have understood the potential of crypto and are getting the first movers advantage. Even Russia has announced that it would legalize cryptocurrency and is passing their crypto law next week, then why should India be left behind?," asks Ashwin Singh Takiar, a Bitcoin investor and crypto trader.
Crypto players with whom THE WEEK spoke to after the RBI deputy governor's statement feel that cryptocurrencies and Bitcoins have been popular for more than a decade now and the reason for some people to be wary of this industry is the fear that paper currency could become obsolete.
“Digital currencies and related technologies are likely to reduce transaction costs and ease methods for cross-border payments. Bitcoin, which is often criticized for the fluctuations in its value, is, in fact, more stable than government currencies as it has a “fixed supply”, while fiat currencies are prone to manipulation and dilution. It is for this reason that institutional adoption is on the rise, along with countries recognizing it as a legal tender. On March 4, 2020, the Supreme Court had quashed the ban that the RBI had previously imposed on trading cryptocurrencies. But the RBI still remains hostile towards the industry, while most other central banks have made a more inclusive move towards this burgeoning sector,” remarked Darshan Bathija, CEO and co-founder of Vauld.
Many players strongly feel that a ban on virtual digital assets is certainly not the best advisable option as argued by Sankar as his observations have focussed more on the currency aspect of digital assets. “The discourse pertaining to digital currencies needs to shift from payments (legal tender) to use cases such as tokenization, creator economy, web3.0 and metaverse. A ban would lead to brain drain and capital flight. Many crypto startups and techpreneurs have started moving towards more crypto-friendly jurisdictions such as Dubai and Singapore. Prohibiting crypto assets would diminish India’s potential to be a global leader in the web 3.0 era,” said Sharat Chandra, Blockchain expert, IET Future Tech Panel.
Chandra feels that the evolving nature of blockchain and crypto technologies requires an agile regulatory approach. “The government should ring fence crypto entities by creating a licensing framework, and bring them under the purview of existing PMLA,FEMA regulations to bring compliance as far as money laundering and foreign exchange violations are concerned. Categorizing digital assets as per use case and utility can follow later. A blanket ban is simply not the answer,” added Chandra.
A few experts agree that RBI is not a huge fan of crypto and has tried to oppose the adoption of crypto by India repeatedly, right from 2013, four years after the launch of Bitcoin. Even now, although the tide seems to be turning in favor of crypto, the RBI is not. “The fear stems from the uncertainty posed by blockchain technology. It is a decentralized technology that threatens the existence of centralized banks and undermines its regulated entities. It believes that the introduction of crypto in the Indian markets could prove fatal and lead to economic instability. However, the financial budget 2022 and the upcoming ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ have made it clear that the government is more inclined towards regulation rather than a complete ban,” observed Prof. Padmanabha Ramanujam, Dean, IFIM Law School.
He further observed that given the rapid acceptance and indulgence in the technology from the government and more importantly from the younger generation, it seems unlikely that a complete ban would be possible or even prudent. Its newness and unfamiliar nature should not deter us from reaping its full benefits.
“ If India were to close its coffers now for crypto, then we will be cut off from the global ledger. What would instead be wiser is to regulate the technology to prevent its misuse. It is in fact imperative for socio-economic betterment. A balanced regulation would put the investor’s mind to some ease by bringing transparency in its trading and prices. It would also lend to financial stability and address the concerns over money laundering and illegal use. Therefore, it would be safe to say that the repeated attempt to ban crypto by the RBI is not going to bear any fruits now. The world is already traveling along the path to becoming a digital and blockchain operated economy. We should embrace the change and try to adapt and govern it. Denying this fact will only put us behind the rest of the world," said Ramanujam.