The Hard Truth Is That Cryptocurrencies Cannot Be Banned
By kadhir velavan on ALTCOIN MAGAZINE
We keep hearing about Government banning cryptocurrencies. This has become a regular FUD over the past few years. Recently also it was rumored in the media that India is about to draft 10-year jail term for holding/mining/trading cryptocurrencies. This is a complete joke since one cannot go to jail for memorizing 24-word seed phrase.
If we look back and see if the banning of cryptocurrencies were anyway effective and whether governments were successful in controlling their citizens from taking part in this decentralized revolution, the hard truth is that governments in the past have failed miserably, and if you want a live example then you need to look at China and the aftermath of ban.
China’s Exchange Ban Was Ineffective
We all know that China banned exchanges from operating within the country, and citizens were also warned not to trade or hold any cryptocurrencies. PBoC was banning initial coin offerings (ICOs) and shutting down domestic fiat-to-crypto order book trading. This led to the closure of three most significant exchanges in the world, namely BTC China, Huobi and OKCoin. It was a temporary shock to the crypto community, but the exchanges moved abroad and are now thriving. Even the Chinese citizens are still buying cryptocurrencies using OTC counters.
Recently Tuur Meister published a report and in that he mentioned that the recent rally in Bitcoin price to 9k USD was due to the China-US trade war and it was due to heavy Chinese buying that let to the price rise.
Below is from his report “A Note on the Bitcoin Rally.”
However it appears we underestimated one factor: capital flight from China. On May 5th, the Chinese Yuan started weakening against the US dollar, and 13 days later traded 2.5% lower — a huge move in forex terms. Remarkably, that was also the week that bitcoin broke above the resistance of $6,500. In short, there’s a significant chance that in fact it was Chinese investors who pushed bitcoin in bull market territory this year.
Another evidence that Chinese are still trading bitcoins is that you can see the volume of Tether being traded in Chinese Yuan. If you still need a live example of Chinese buying cryptocurrencies, you can visit local.bitcoin.com and select the location China, and you would see so many people still trading peer to peer.
Can India Ban Cryptocurrencies And Jail The Holders/Traders
The next million dollar question that citizens of the biggest democratic country in the world ask is whether the government be able to ban Cryptoassets(Indian government call them Assets and don’t give them legitimacy as currencies) and jail the holders/traders of these assets.
The answer is a big “NO.” The reason for it is that government cannot jail someone who memorizes a 24 world seed phrase of his hardware wallet where he has stored his crypto assets nor can government monitor the traders(90% of the traders’ trade in international exchanges like Binance) who are mostly anonymous.
There are around 2 Million active traders in India, and all of them use P2P exchanges anonymously. Even this P2P culture was motivated by the government when they announced that the banks would not work with the exchanges and people/entities who are involved in cryptocurrencies. So, It was the government’s fault in first place for allowing the trade to happen underground, instead of happening in registered exchanges with KYC under their nose. It also helped them to collect taxes and regulate appropriately when exchanges were functioning correctly.
It is now the same RBI and the Indian government making another big mistake by banning the crypto assets and drafting a bill to punish the holders/traders by jailing them for ten years. This will only help in adoption, and it won’t prevent people from buying/trading/holding crypto assets.
Indians have become more resilient after FUD after FUD hitting them hard in the past few years. They are still trading in significant volumes, and the price has not dropped a single dollar. They know very well that there will be a way for them to trade somehow or the other. They have been well trained in P2P now, and international exchanges and they have to thank their government for it.
Below is a tweet from a cryptocurrency enthusiast and coincrunch India author Naimish about how the market was unaffected after the news broke out about the draft that mentioned the banning of cryptocurrencies.
Another tweet from a crypto enthusiast mentioning that he is ready to go to jail rather than selling his Bitcoins.
Government/Banks Will Fail Against Banning Cryptocurrencies
Indian government or banks no matter how hard they try will fail against this decentralized monster in disguise. This monster can be controlled only by regulating them and allowing the exchanges to function with proper KYC. If they try to do any other things like banning or jailing the traders/investors, it will only backfire them, and it will end in massive adoption that cannot be monitored or controlled by them. It will all go underground, which is even more dangerous for the regulators, and it will also encourage money laundering.
The Indian traders who have tasted profits in cryptocurrencies and those who have appreciated this destructive technology will never go back to filthy fiat. They will somehow find a way to invest/trade crypto assets no matter how hard the government tries to prevent them. They will not sit back and watch the rest of the world participate in this innovation and become millionaires, whereas they are left behind with the ever-inflating Indian Rupees.
So, It is up to the regulators to understand that they make use of this destructive technology and allow their citizens to prosper or they go down in history as clowns who tried hard to prevent a tech that will eventually engulf the entire world in the next few years.