The thought of the possibility that an entire country would ban its citizens from using any type of cryptocurrency is one of the oldest and most deeply rooted fears in the entire crypto community. This specific fear came about in the early days of public attention being focused on the crypto assets.
Before that moment, the concept was contained in the community of enthusiasts and virtually unknown to everyone else, including tech-savvy individuals. For a long time, many were dismissive about this fear because of its practical propositions, but also the small likelihood that any nation would try to employ such a drastic measure.
Now, however, the latest information coming from the regulators in India and the wording they are using could signal the change that would lead to an encompassing ban of all cryptocurrency and any form of their use.
Banning Private Cryptocurrencies
The government of India has been considering the option of banning what it describes as private cryptocurrencies in the whole of the country. For some time, the nation has been devising ways how to regulate or completely stop particular domains of the cryptocurrency markets. To the Indian cryptocurrency development and startup community, this continues to be an excruciating problem.
But now, at the 19th meeting of the FSDC (Financial Stability and Development Council) that took place recently, the country’s finance minister talked about the challenges and issues of cryptocurrencies and crypto assets. This was revealed in an official press release by the government. The discussion also included a segment where the council was informed about the deliberation of a framework that would allow the banning of the use of any private cryptocurrencies in the nation.
The statement, like the event which it covers, allows for plenty of wiggle room in any direction, which would indicate that the decision about this has not been made. But, at the same time, it shows that the government’s top echelons are working on a proposal that would do what no other major nation in the global cryptocurrency market did – ban all of the token-based activity in its borders.
The Unclear Nature of the Effort
The status of any potential framework that would be used to ban cryptocurrencies is completely unclear. But, if it does manage to come into effect, the result would be the banning of the use of cryptocurrencies by Indian citizens either for the trading of exchange purposes.
Yet, interestingly enough, the wording and the phrase of “private cryptocurrency” leaves space for the Indian Central Bank to issue and before that, launch its own digital currency known as a CBDC (Central bank digital currency). The same possibility has been proposed and discussed before.
This August, the RBI (Reserve Bank of India) stated it has been undertaking research into the possibility of creating a CBDC peg to the rupee. The main reason for this is the bill of almost $90 million each year that goes into the process of minting physical money.
While there is no doubt that the Indian government has been pursuing a negative campaign on cryptocurrencies for some time, it has also used this opportunity to state on the same committee meeting that it plans to encourage the development of digitally distributed ledger tech. This is a complete paradox but often something that is seen in countries that want to stop the use of crypto in what they perceive as a problematic behavior of its citizens.
This mainly means the use of cryptocurrencies for the avoidance of the different local laws. Yet, there is the clear problem of either providing a beneficial environment for the development of cryptocurrencies and the supporting tech of blockchain or the same environment is lacking. In India, having in mind the recent development, it would be exceedingly hard to argue that anyone the country is offering anything similar to a positive development environment. But, the issue of the economic potential in blockchain is probably by now clear to any politician in practically any developing country.
Because of this, at least the official line has to be one of blockchain support. There are also practical examples of development, but their actual feasibility remains a murky issue. For example, the NITI Aayog, or the National Institution for Transforming India, has begun looking for a proof-of-concept development that would explore the blockchain tech as a tool in the domains of health, agriculture, and education. While this is all well and good, there is a question of how much is the same sense when it comes to complete block on any defined and usable cryptocurrencies.
Stopping Black Money
Like in many developing nations as big as India, it is easy to see any side of the argument. There is a clear sense that in the previous decades, the country managed to produce a huge wealth from its economy. The billion-strong market has been able to push through into many domains and even on an internal level, the nation has been an ever-opening market in almost any domain, from online retail and esports to many high-tech physical products.
India might not be on the level of the Chinese development, but it still has a solid track record when its position in the world only 70 years ago is considered. However, the development has been marred by a range of issues. For example, the federal Indian system often called one of the most robust large democracy in the world, has many downsides for business and economic development.
The same will most likely continue in the future. But, the biggest hurdle for the country is its corruption and the skewing of rules when it comes to taxation, judiciary system and so forth.
This means that for decades, so-called black money has been seeping out of the country, robbing its governments for the taxes they are due. Surely, many Indian politicians see cryptocurrencies like bitcoin as only one more means of doing the same siphoning and this is why they want to stop it. However, the process will also stifle the development of crypto ventures locally, making it a continuous double-edge sword issue.