It’s no secret that India is seeking to ban cryptocurrency. While many had heard that one of the most powerful and populous nations in Asia was considering banning cryptocurrency, the Reserve Bank of India solidified the theories.
Specifically, the central bank released a statement in which it outlined how all banks and regulated entities in general should immediately stop dealing with both individuals and businesses who trade cryptocurrency.
The move was criticized especially by one of the cryptocurrency space’s most influential proponents, Tim Draper, a known permabull and legendary Silicon Valley venture capitalist and early investor in large tech companies such as Skype and Tesla. Draper even suggested that Bitcoin could replace the Indian rupee and pointed out that he wished that he could inform the Prime Minister that he had made a mistake.
However, it is very clear that banning cryptocurrency is not as simple as one might think.
For one, cryptocurrency is purposely decentralized and not limited to a geographical location precisely so that it does not fall under the jurisdiction of a particular bank or government. There are many in the cryptocurrency community who believe that this is why, so often, those involved with central banks tend to criticize cryptocurrency, pointing out that they pose a legitimate threat to traditional financial institutions in general.
This sentiment has been echoed by one of the most well-known international financial organizations in the world, the International Monetary Fund (IMF), which recently published a report entitled Monetary Policy In The Digital Age pointing out that with the rise of cryptocurrencies, the world might be less dependent on central banks in general.
Is the Ban Effective?
Of course, the Reserve Bank of India’s ban is significant, and is enough for cryptocurrency investors and traders to lose confidence in India. In fact, one of the largest cryptocurrency exchanges in India, Zebpay, was forced to shut down several months after the ban, even though it boasted several million users. The exchange admitted in late September that the curb on bank accounts had crippled their ability to transact business meaningfully.
While the government could potentially shut down other exchanges, the truth is that the spirit of capitalism will always allow for the opportunity for smaller exchanges to spring up and succeed. In fact, even without smaller exchanges, technology allows individuals to circumvent these laws thanks to technology, as we have seen Chinese traders and investors utilize VPNs and Tether to circumvent their own ban on cryptocurrency, as well.
The Unocoin Incident
There are many who have criticized a recent event involving the first “Bitcoin ATM” in India, where police arrested the founders of the cryptocurrency startup Unocoin, Harish BV and Sathik Viswanath, for installing a kiosk for cryptocurrency in a mall.
The incident made international headlines, as those in the cryptocurrency world were stunned that the government would interfere, especially considering that Prime Minister Narendra Modi had specifically urged for the nation to go “cashless” for some time now, a vision that cryptocurrency could obviously help with.
It should also be noted that there are 29 states in India, and it’s possible that certain states might challenge the cryptocurrency ban in an attempt to attract cryptocurrency enthusiasts and entrepreneurs from all around the world. In fact, it was revealed that the state of Karnataka—where Unocoin’s founders were arrested—was looking to set up an “Innovation Authority.”
When one considers that many countries have reversed their stance given the technological potential of blockchain, it isn’t too farfetched to consider that an outright ban would not only be ineffective, but not welcomed, for much longer in India.
India’s Social Welfare Minister Priyank Kharge himself stated that technologies are fast changing and the relevant policies are only trying to catch up.
Is It Possible?
While the Finance Minister Arun Jaitley recently discussed with a council the possibility of outright banning cryptocurrency, others, such as founder and CEO of cryptocurrency exchange Wazirx, Nischal Shetty, has stated that the demand for and convenience of P2P trading is tremendous.
In August, he had pointed out that more users signed up for Wazirx’s P2P trading service in two weeks than in the previous two months, indicating that there was a significant demand for the service.
While it doesn’t seem like the government is clamoring to create a climate for cryptocurrency to thrive, the fact of the matter is that one country cannot truly “ban” Bitcoin, or cryptocurrency, in general. It is also very likely that India, one of the most powerful economies and populous nations in the world, might eventually truly see the potential in blockchain and cryptocurrency, and create a regulatory framework that makes more sense for the future.