Here is why India Inc. needs to oppose the Bitcoin ban
As the Indian government ponders over the future of cryptocurrencies, the market cap of popular cryptocurrencies keeps reaching new highs. This is bolstered by a veritable gold rush amid the market’s search for reliable assets with high returns. These entities are immune from deflationary monetary policies of central banks and the printing of currencies by countries such as the USA. As records are broken every other day, the current market is in the wild-west phase where traditional financial institutions have yet to foray into and monopolize the market with their immense resources. With countries like Ukraine planning to mine Bitcoins with the power from a nuclear reactor, such a time isn’t too far off.
No bull market is fated to last forever, past experiences have shown that over a long enough time period, the average returns trump almost every other asset class in existence. Given the immense potential for growth, the world rushes to get a piece of the pie. With the inherent advantages of cryptocurrencies, such as decentralization, lower international transaction costs, and currencies divorced from inflationary or deflationary geographical monetary policies, it becomes a no-brainer that the average financial investor would be tempted to invest in what seems to be the future of financial systems; a financial system that arguably might render existing monetary systems purposeless.
Governments world over are apprehensive — the possible ramifications of the undermining of traditional financial as well as monetary institutions, which are much more amenable to the demands of the governments, allowing them to steer the country into paths dictated by governments themselves. Add to that the potential for certain cryptocurrencies to be significantly more anonymous than fiat currencies. Governments fear the creation of a large parallel economy, the funding of nefarious activities by non-state actors using cryptocurrencies. Granted, national security is a valid concern, but it should be ensured that such fears are not simply the result of the fear of the unknown. After all, most other countries that face even greater national security threats than India have not banned it, not to speak of the fact that incidents of terrorism have lowered, not increased as the adoption of cryptocurrency has increased, so there doesn’t seem to be a correlation between the two. Such reasoning fails to answer for the fact that terrorism or criminal activities have existed long before the rise of cryptocurrencies and relies on fiat monies and not the blockchain technology itself. No country would sooner ban their central bank for issuing fiat currencies than they would ban cryptocurrencies just because of the people who misuse them.
It should be considered that fears may have certainly been fanned by certain actors who stand to lose the most from widespread adoptions of these currencies, and therefore Indians must consider that certain arguments may not be bonafide in their intent. The facts must be gleaned from fiction, and the facts do speak for themselves. The fears of “parallel economies that are not subject to the law” are only a self-fulfilling prophecy, as restricting the arm of the law to deal with the industry only serves to ensure that the crypto-space remains to be outside the ability of the authorities to deal with. This also assumes that cryptocurrencies can be banned by government action. Certainly, legitimate companies and exchanges like WazirX may simply cease to exist, but there is hardly a way for governments to ban peer to peer exchanges than it is for them to ban two people trading in fiat money all over India.
Cryptocurrencies represent a way for world governments to show that they truly espouse the ideals of democracy and of a free market, as they allow cryptocurrencies to be traded and exchanged on terms dictated by the people themselves, and not third parties. The nature of cryptocurrencies insulates them from coercive actions by other countries. India may freely buy oil from Iran without fearing US sanctions, given that the use of cryptocurrency is widespread worldwide. Bullying in this fashion is disincentivized, and on the other hand, rejecting the future of finance will ensure that the Indian Government’s reserves of cryptocurrencies will be lower than ideal, further exposing them to greater risks when dealing with foreign currencies. It is a well-accepted principle of the market that if any entity has majority control of assets, they control the flow of the market itself. Allowing Indian citizens to control a significant portion of the cryptocurrency market would insulate future India from aggressive states that seek to inflate or deflate cryptocurrencies making use of their massive stockpiles. Not playing the game doesn’t mean that India will not be forced to face the consequences by the champions.
The Indian government aims to bring large portions of the population within the ambit of traditional brick-and-mortar banks. Adopting and regulating cryptocurrencies will rapidly enhance the process of bringing populations under the banking system, as instead of expensive server systems and setting up offices in regions with little financial liquidity, all that is needed to store crypto-assets is a digital wallet address, which merely holds the key, the assets themselves are stored on the blockchain. This also allays the fears of the citizens that their hard-earned monies may be misappropriated by unscrupulous elements within the financial system through NPAs or general corruption. Although the sanction of loans by banks certainly bolsters the economy, it seems to be the more democratic thing to offer is an option to the citizens of India to store their currency in a system that will not lend out their money while also giving them the option to participate in digital transactions. Currently, no banks in India (or anywhere) will accept your money if you don’t allow them to use your funds to give out loans. Cryptocurrency does just that while taking out the middleman so each citizen remains in complete control of his assets.
Banning cryptocurrencies will only serve to vindicate the naysayers who maintain that the Indian government’s policies are not conducive to the growth of new industries and technologies. India so far has lagged behind most other world superpowers in the widespread adoption of emerging technologies, but today exists a small window of opportunity where like other developed nation-states vacillate over policies to deal with these new assets, India can emerge as a new world leader through proper regulation of these assets. Thus, ushering in a new era where India can deal with her neighbours like China from a position of strength.
In the end, smart regulations that are based on research and facts would serve the government to gain new avenues of taxation, one where the benefits go beyond increased tax collections. Further, the knowledge promoting applications of blockchain technology through cryptocurrency will go far in transforming India’s financial and monetary institutions to strengthen India’s economic might.
