Indian media and social media are now abuzz about crypto as the government is about to table the much awaited crypto currency Bill in the parliament within a month. The pro and against lobbies are churning out arguments on whether crypto should be banned in India or regulated. RBI which is equivalent to FED in US is dead against crypto; the government which was earlier in line with the RBI thinking seems to have softened its stand a bit and wants to regulate it. The government had a meeting with the stakeholders and the government view is derived from the discussion in that meeting. The actual Bill is listed in parliament though the content has not been made public till now. The Prime Minister of India with whatever he has been fed made a statement in the Sydney Dialogue that crypto should not fall in to wrong hands and spoil the youth. I fail to understand from where he got this idea that it will spoil the youth.
The first concern of the ‘against’ lobby is that crypto has the potential to be a cause of financing terrorism, narcotics, money laundering and every other illegal activities under the Sun. Crypto originated in 2009 and in India very few people had even heard of crypto till 2016, with no proper exchange existing in India. Just like many other countries a few cases of use of crypto for illegal activities have been unearthed in India and also a case of politicians, bureaucrats and Police officers using crypto to launder their corruption money. If crypto will get banned then this system will not stop but will go underground but still function. Whereas after regulating it the government will be able to monitor trading activities and collect tax.
‘Hawala’ – It is a system of money laundering which has been in use in this part of the world for decades. Suppose I want to send money to a person in USA without using the regulated channels - I deposit some Indian currency in India with an agent and someone in USA will give the equivalent amount of dollar to that person, off course after a commission cut. This is the most favoured way of financing illegal activities in most countries. This system is also used by some common people to send money to relatives in foreign countries beyond the limit set by the government.
3 years back the Prime Minister of India suddenly came on air at 8 pm and announced that 500 and 200 denomination currencies will be illegal from tomorrow and those bills have to be deposited in banks and exchanged in to other denominations from banks. This was done to wipe out black money. People rushed to banks from the next day, stood in long queues to get them converted.
Now with the might of the government and so many agencies working for it, it has miserably failed to control illegal activities using fiat money for the last 50 years. Did the government at any point of time felt threatened by its own currency?
The second concern of the ‘against’ lobby is that crypto will erode the sovereignty of the official money of India. In this case the main target is the stable coins pegged against a fiat like dollar. The government thinks that money from the traditional monetary loop may shift to the stable coins. The native currency may lose value. I think this is ill-founded as the fiat monetary base is too big to be dented by stable coins. Also as long as stable coins are restricted from being used as a currency for routine day to day use then it is no threat to the local fiat. Does the government not have faith in the power of its fiat?
The third concern of the ‘against’ lobby is the volatility of the crypto price. Retail investors entering crypto with due diligence are aware of it and play that way only. It is the reckless price chasers in short term who burns their fingers. But similar is the case with penny stocks stock markets which are pumped and dumped leaving behind a trail of burnt fingers. It becomes an individual’s responsibility how he wants to play. If government institutional investors are not entering crypto then there is no problem of capital erosion.
The fourth concern of the ‘against’ lobby is cheating and rug pulls whereby investors lose money with no recourse to remedy. This is where regulations come in to protect investors from such type of operators. It exists for stock market and therefore can also exist for crypto market.
At present the government will not give a level playing field and let the citizens choose, that is too big a thing to ask. In fact a lot of people must be waiting in the sidelines just because the Bill is not placed and the law is not framed. I expect a lot many people will enter crypto in India once the fog is cleared. At present it is only crypto which has the capability to better the financial condition of the middle and lower middle class provided they play it with caution and not treat it as a get rich quick scheme.
Thank you Telesfor sir.