India plans to ban cryptocurrency
November 2, 2018 5:47 am,
The Indian government mulling a blanket ban on cryptocurrencies has set off alarm bells in the ecosystem. For such a move could deal a blow to an industry already struggling under tightening norms.
On 30th October, a meeting of the country’s financial stability and development council (FSDC) deliberated the banning the use of private cryptocurrencies in the country. The FSDC is a high-level committee of officials, headed by the finance minister Arun Jaitley to study some risks to the Indian financial system. The meeting was also attended by Subhash Chandra Garg, the secretary in the Economic Affairs department. Garg heads a panel set up by the finance ministry in 2017 to recommend norms on virtual currencies.
A loss for bourses and technology
Cryptobourses in India is already choking from a hostile regulatory environment. Since July, Indian banks have been barred by the Reserve Bank of India (RBI) from having a business relationship with exchanges and traders. Trading volumes have plummeted since then and the addition of new investors has fallen. But most exchanges have managed to stay alive by moving to peer to peer and crypto to crypto trade.
What is a blanket ban?
Ban the use of crypto coins which probably means that people won’t be able to buy and sell then the exchanges will have to shut down. Other law enforcement agencies, such as the income tax department may go after the exchanges, making it worse for the industry. Shifting the business to foreign locations can be a scary and tiresome task for all the exchanges because of the higher costs involved and also the intense competition in crypto friendly geographies. So only the relatively bigger exchanges can choose this option.
Let’s see the ZebPay, India’s largest virtual currency exchange, shut down operations in September as the RBI’s diktat made the business unviable.
Blockchain technology will also flee the country. The majority of innovations on the technology will move away from the country. Institutions will feel restrained to use the public blockchain it will as it will involve the use of cryptocurrencies. This will make the country technologically poorer since blockchain technology has wide applications in fields like farming, education, health etc.
If the ban comes into effect, there many ways to work around this ban. This ban is not going to be an overnight ban. Since many Indian investors have bet on these digital currencies, they will be given some time and avenues to divest their stakes. Some though may choose to hold onto their currencies and explore other avenues later for selling these currencies.