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Why government and RBI need to show some tough love for cryptocurrencies

Why government and RBI need to show some tough love for cryptocurrencies

May 2, 2018 9:19 am,

India saw the internet’s commercial launch exactly that same year: August 14, 1995. The result is, today we are the cusp of 500 million internet users. India is one of most data-hungry countries in the world. Its e-commerce market is one of the world’s largest. The next wave of seismic change will come from blockchain and cryptocurrencies. Their transformative and economic credentials are there for all to see. The opportunity is open to lead this revolution. But where is India? The internet got in because it didn’t raise the hackles of the powers. Cryptocurrencies? Not so lucky. A Reserve Bank of India (RBI) notification on April 6 barred all regulated entities — commercial and cooperative banks, payments banks, small finance banks, NBFCs and payment-system providers — from dealing in cryptocurrencies. The impact is not limited to the financial system but spreads to the innovation pipeline in the underlying blockchain technology. If it keeps going down this path, India will likely be playing catch-up when blockchain and crypto assets move from being shiny new things to a way of life. Sure, blockchain and cryptocurrencies are different ideas. Banning one doesn’t mean banning the other — in fact, India is gung-ho about blockchain and is embracing it in everything from banking to education. But here’s the thing: they need each other. The uncertainty miring cryptocurrencies isn’t good news for India’s blockchain aspirations. The most damaging is it casts a shadow on the country’s so-called commitment to technology to transform itself. This is a battle that has governments and traditional institutions grappling with the potential end of the status quo on one side, and the crypto community on the other. The latter’s idealism — that traditional power centers can be cut down to size by the large-scale adoption of blockchain and cryptocurrencies assets — is at odds with the realities of the world. Moreover, this claim of moral superiority is marred by the presence of fly-by-night operators who run Ponzi schemes around cryptocurrencies. As Kasper Korjus, managing director of e-Residency in the Republic of Estonia and the force behind that country’s crypto token, Estcoin, tells ET Prime, “Both these sides often behave as if the other has no future. Like most things, the truth is somewhere in the middle.”