If you want to kill a few wild sheep in the jungle, is it a good idea to burn down the forest? Well, that’s what India is trying to do by banning cryptocurrencies like Bitcoin. The draft law proposes to ban mining and possession of “illegal cryptocurrencies”.
The government feels that these currencies can be used for tax evasion. Since moving money to other countries using cryptocurrencies is easy, the government fears that corporations and individuals can use it for illicit reasons like money laundering.
There is also investor safety at stake here. Since this is a high risk market with little regulation, the RBI might not be able to safeguard investor interests in case the prices go berserk.
However, I believe that this would be a disastrous move. A lot of Indian software development companies lose out on a big chunk of income because of cross border transaction fees. Cryptocurrencies have the power to eliminate that.
Moreover, it would be practically impossible to ensure the ban because there are no official details of the transaction in the accounts. The black market for this will always exist.
Back in the 80s, it was illegal to import Sony speakers- to “safeguard” the interest of speaker manufacturers in India. The government believed that foreign companies would eat up Indian market. The importers of such speakers were arrested for smuggling. This is a move in that direction.
Today, cryptocurrencies have made the financial world more global. A ban in such situations is like taking a step back.
In fact, India should list such currencies on NSE and BSE so that the trading and use of currencies is out in the open and can be regulated to some extent.
On a lighter note, this is like banning alcohol in Gujarat and Bihar. Looks good, doesn’t work. Would you buy bitcoin in its current price if it is listed on Nifty? Let us know in the comments below!
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