Cryptocurrencies such as Bitcoin has knotted several economies around the world, including India, in a state of confusion. Whether they should allow it or ban it or how to regulate them, opting a conflicting stance towards cryptocurrency India is planning to impose a ban on cryptocurrencies. However, industry experts deem this task as impossible.
According to Quartz India, while the Indian government hasn’t yet made up their mind, but a ban might not be the best way out of the cryptocurrency ecosystem. Cryptocurrencies do not obey any national jurisdictions as they are powered by a decentralised, distributed, public online ledger known as blockchain technology. Here a global network of computers manages the database that records all deals.
Reportedly, a meeting helmed by India’s finance minister Arun Jaitley, last month have had officials of the country’s central bank, the market regulator, and a committee especially formulated to study the cryptocurrency ecosystem. The idea, planning and repercussions of banning “the use of private cryptocurrencies in India.” was the main agenda of the meeting.
The ban in most probability will be implied on buying, selling, and transaction of cryptocurrencies, not on their possession. According to experts, banning crypto possession won’t be feasible as virtual assets could be stored via multiple options like in the cloud storage facilities like Dropbox, physical storage devices like a laptop or pen drive, or on a private digital wallet. Speaking on the matter the founder and CEO of WazirX, an Indian cryptocurrency exchange, Nischal Shetty, stated:
“Even if the government decides to ban possession, it will be just impossible to implement it.”
With an estimate of nearly 5-6 million, user base India currently hosts (albeit unwillingly)10 large crypto exchanges, another way of blocking cryptocurrency trading is to force the exchanges to shut down. Shetty, adds that this might not even be a permanent solution:
“The government can successfully ban the known, big exchanges; but then small, hyperlocal exchanges will possibly come up and it will be extremely difficult to keep track of, and block them.”
In fact, this might lead to more back door entries in the ecosystem, as Crypto investors may resort to peer-to-peer channels. Which is technically more trouble for Indian government as explained by Tanvi Ratna, policy counsel, Incrypt, a firm that advises companies on blockchain technology.
Once an Indian (citizen) is invested in a foreign exchange, it might become impossible for the government to trace his or her investments, because most foreign exchanges also allow conversion to private coins which makes transactions untraceable.
Countering this way out, R Gandhi, former deputy governor of the Reserve Bank of India, told the publishing that such transactions have the high-risk potential for the investors:
“As any transaction in crypto will have to be settled in real currency, somewhere the formal system will be able to catch it, especially if a forex dealing is involved,”
Regulations vs Ban
The worry and precaution of Indian government are not unjust, as the virtual assets have their set of flaws, from price volatility to money laundering. In fact, their complex nature often conjures the chances of consumer frauds
However, banning them is not the precaution one needs to take, as this will only fuel the illegal activity. For instance, tracing transactions will be all the more difficult if a ban is exercised. The CEO of Eleven01, a firm that deals with blockchain technology, Ausaf Ahmad, gave a better solution:
“Ironically, the only way these activities can be controlled better is under a regulated framework, by clearly defining entry and exit points and requirements from users and exchanges.”