Why Indian Government Will Legalize Cryptocurrencies Such As Bitcoin
India has always been late to the global parties. For instance, the first ever mobile phone call was made on April 3, 1973, and through the 80s and 90s, the people in western countries were all virtually connected. However, it was only on July 31, 1995 – 22 years later since – did India saw the first phone call ever made in the country.
(Fun Fact: Then Union Telecom Minister Sukh Ram and then WB Chief Minister Jyoti Basu were the ones to make the first ever phone call in India.)
From accepting to an open economy to firing up the first mission to the moon to establishing a functional higher-education framework—we’ve always been lackluster in every dimension. This same pattern has now taken a behemoth stance that we can actually implement to foresee “what’s next?”
When other countries are doing ‘that’, why are we still clinging to ‘this’? The question is even more relevant today when we so casually toss the idea of India being the fastest emerging global leader if it isn’t already there yet.
Let’s Talk Cryptocurrency
Keeping in line with the above-registered theory, let’s magnify on how India is dealing with cryptocurrencies right now. Oh wait, are we even dealing with it?
True to our lasting culture where when our mind reads “what is it” to innovations, our lip syncs “BAN”, the great ban-boozled democracy has decided to choke the likes of Bitcoin and ban them for good. When other countries are busy developing a regulatory framework for this evolving market, we are giddied with the same response that we have for the porn—NO.
(By the way, did you think you would ever read ‘ban’ and ‘democracy’ in the same sentence? *self-pats*)
In April (2018), Reserve bank of India passed a circular, asking all the banks and digital wallets in the country to stop facilitating cryptocurrency transactions. This diktat prevents banks and non-banking companies to have any kind of transactional association with firms, intermediaries, and individuals who deal with digital currencies.
What’s RBI up to?
This circular came into effect on July 10, when virtually all the crypto exchanges and related firms had their bank accounts seized and embargoed. While this, in no way, makes Bitcoin any less inaccessible and untradeable, the move is certainly a stomp on the neck to choke market’s breath.
What was RBI’s contest behind this autocratic order?
“It is universally felt that they can seriously undermine the anti-money laundering/FATF (Financial Action Task Force) framework, adversely impact the market integrity and capital control. And if they grow beyond a size they can endanger financial stability as well,”
said Deputy Governor of the RBI B.P. Kanungo.
In response to the petition by cryptocurrency exchanges and market pundits, even Supreme Court of India supported RBI by refusing to stay this ‘partial-ban’.
The blatant statement and decision on Indian side joins the line of bunch who dives in the ‘for or against’ argument with incomplete and obscured critique. And this was evident in the RTI’s response of the Central Bank, in June (2018), where it claimed it had no internal committee or regulator to look at the functioning of virtual currencies before issuing the noted circular to the banks.
Where does the Government Stand?
The government at the center have an even worse stance than RBI. While at least RBI has been clear that it’s trying to pull the oxygen plug out, Modi government is at it on a whole different level.
‘We will ask you not to get involved in the cryptocurrencies. BUT we will also ensure that you have all the space to buy-sell the digital tokens and grow your portfolio without any repercussion.’ That’s basically where the current government stands. Perhaps they know they would upset lakhs of investors-cum-voters, the majority of who comes from Surat and other metropolitan cities. Or maybe they are giving the ministers, politicians, and partners enough time to make the most of cryptos. (Yes, a-la-demonetization when few already settled their black money ahead of the economic anarchy!)
On November 30, 2017, FM Arun Jaitley said, “Recommendations are being worked at. The government’s position is clear, we don’t recognize this (Bitcoin) as legal currency as of now.” He didn’t say Bitcoin is illegal.
On January 2, 2018, Arun Jaitley iterated, “Through multiple notifications, the two parties (the government and the RBI) have notified the public time and again that Bitcoins will not be considered lawful or legal tender in India.” Again, he didn’t say cryptocurrencies are illegal.
On February 1, 2018, in his fifth straight Union Budget, in front of all the parliamentarians, Arun Jaitley made a final statement, saying, “The government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payments system.” Again(x2), he never said digital currencies are illegal.
Told ya, government’s stand is confusing. But as of right now, cryptocurrencies ARE NOT illegal in India.
How Are Other Countries Dealing with It?
-If you’re talking about Pakistan— yes, unsurprisingly, there’s a total ban of cryptocurrencies there. But when talking about better and much progressive countries, even when with a fair share of problems, the majority of them are treading much better
-In the USA, Bitcoin is treated as a commodity and is taxed as a property.
-Canada has an intensive framework to regulate the companies dealing in cryptocurrencies.
-United Kingdom treats BTC as ‘Foreign Currency’.
-Mexico is all readied to regulate virtual currencies under FinTech Law.
-Japan recognizes all the digital tokens are a “mean of payment that is not a legal currency”.
-Germany identifies Bitcoin as a “unit of account” that can be used for tax and trading in the country.
From Portugal and Thailand to South Korea and South Africa—all allow crypto investment/trading as legal. Certainly, they have their own unique stands, keeping in view their domestic challenges. But, at large, they have embraced the growth of virtual currencies one way or another.
Some have highly defined regulations to keep a check on the crypto market, others treat these digital tokens as intangible assets. Some are charging taxes on crypto returns, others are still uncertain and cautioning investors (but without labeling anything illegal or banned).
Of course, there are few countries where cryptocurrencies are implicitly banned; like China, Saudi Arabia, Iran, and Indonesia. Mind you, these are also the countries who limit citizens’ access to the internet.
Is Bitcoin really Nuclear?
Before jumping on the conclusion on which side of the ship should India stride to – to the liberal and progressive or the autocrats and orthodox – it’s vital to discuss, for a minute, the dangers of cryptocurrencies. Like, for example, is Bitcoin really as nuclear as the bears and naysayers are saying?
Keeping biasedness at the very aside, cryptocurrencies are just as dangerous as fiat money. Indeed, we hail the dark web Silk Road case and contend how people around the world would buy drugs using Bitcoin. But in that hype, let’s not forget that millions of people still purchase drugs using fiat. Almost the entire part of global terrorism is still funded by fiat and not cryptos. Trillions of black money is still lying naked in the Swiss banks. All the wrongs are still there and already happening in the world—all funded by fiat money. Does that mean we ban INR and USD? Does that mean we treat them as nuclear?
Pulling the ‘crypto card’ is another one of the trickeries of un-progressive and bungling governments to whitewash their incompetencies and insecurities. You can’t stop murders, terrorisms, money laundering, black money, drugs and other menace—and then you blame the possible negative impacts of cryptocurrencies. Even when Bitcoin is used for all the wrong purposes, how bad could it possibly make the existing problems that are already oozing the threshold level? Are the governments, in support of the ban, suggesting the world vetoes fiat money just because it’s used in the wrong places? Do they want to walk back to the barter system days?
Or here’s a basic, non-rhetorical question—just because an innovation has dangers, does that mean we ban it? AI would have borne the first slice of the axe, if yes.
Good News: Bitcoin will be legalized
You simply cannot play with a technology and hush its biggest by-product. Talking about blockchain technology and Bitcoin here! Indian government and central bank have admitted that they are open to employ blockchain technology in different sectors. How easy (or difficult) would that be when they ban cryptocurrencies in entirety?
As of now, even when RBI has been hell bound to choke cryptos, the market is well alive and breathing. In fact, keeping aside the global factors, the market is flourishing in the crypto-to-crypto model. And with the high enthusiasm of investors and traders (and the indecisiveness of the government), it seems less likely that this would change anytime soon. Also, while the diktats might succeed in cowering the retail investors, it’s unlikely that the whales will make any exit from the market. Not at least today when the likes of Bitcoin market are steering to the traditional turns with Futures and ETFs on the horizon.
The cryptocurrency is an answer to the old and inefficient system that would revolutionize the century forward. The world is accepting that Bitcoin is here to stay. The countries are fast striding to positively react to it. It’s critical that to maintain its tout of being a “fast emerging leader”, India keeps up with the pace of the rest. We cannot shun away something that major economies are preparing to embrace. Thankfully, while we’re always late to the party, we’re at least the part of it. Bitcoin and other (real) cryptocurrencies will be legalized in India. Not today but certainly tomorrow.