The Indian Battlefield Of Bitcoins: Ban Or Buy? One will have to wait and watch to see whether the scales will tip in favor of the volatile money or fall in government's protectionist lap

By Sonam Chandwani

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Indian government's relationship with the volatile crypto can be best described as aversive and antagonistic. The battle against Bitcoins in India had been raged long ago. But given the discovery of odds in favor of crypto, the Indian government is all ready to alter its stance. Earlier, reflecting India's detestable, stern attitude towards cryptocurrency, India had effectively proposed a law to ban cryptocurrencies. However, this rushed, immediate act of the government could actually have hurt the crypto economy and was on its way to becoming the world's strictest policies against cryptocurrencies, which could have criminalized possession, issuance, mining, trading and transferring the red-hot assets.

Along the same lines, a restrictive circular by the Reserve Bank of India (RBI) effectively banned all the banks from issuance and maintenance of crypto assets in 2018. This stringent, detestable stance of the central bank had put many enthusiastic investors on the wrong side of the law. But it is to be noted that since then, the government's stance has not much altered as the measure of a blanket bank was in line with a January government agenda that called for banning private virtual currencies such as Bitcoin while building a framework for an official digital currency. But hopefully and positively, the recent government comments have raised investors' hopes that the authorities might go easier on the booming market.

Bitcoin, the world's biggest cryptocurrency, had hit a record high $60,000 during the pandemic. The popularity of crypto can also be assessed by the fact that in India, despite government's glaring threats of a ban, transaction volumes were swelling, so much so that, 8 million investors held INR 10,000 crore in crypto-investments, which even now is rising. This effectively shows that even though people are panicking due to the potential ban, greed is driving such not-so-illegal choices.

The changing tide in favor of the contentious digital asset

Ripples have been sent across the crypto market since El Salvador accepted it as a legal tender. In another similar event, Miami hosted its ambitious Crypto fair in order to court various crypto investors to its state. Interestingly enough, various ambitious and promising entrepreneurs such as Jack Dorsey and J Zay have also come up with Bitcoin fund which will help in endorsing and funding crypto development in developed and developing countries like India. While all these events have great potential to shake global markets but it is yet not unambiguous that whether it will be the future global currency or not but it emphatically projects that economists, governments, political leaders and investor are increasingly recognizing the robust and significant potential of a decentralized financial system. But to count India in this group of enthusiastic supporters of crypto will be a gross misjudgment.

Given all the successful points in favor of crypto why is Indian government so reluctant? It is due to its volatile, ambiguous, dubious and unregulated aspect that India is aversive to. In support of such hostility, several prominent personalities have also stepped forward to spew their hate on the contentious digital asset. The former President of the US, Donald Trump, has aired his suspicion about the digital asset and has called for an effective ban. Similarly, after months of canvassing and endorsing, Tesla CEO has now come forward to debunk all the claims that crypto can be the future currency by claiming that it is not real money.

But is such a stern attitude required? Many economists and experts have come forward to express their concerns. For India, it can be a boon in disguise as adoption of cryptocurrency and innovative technology can eventually soften India's dependence on the US dollar. This can materialize, if global trade eventually moves to a decentralized cryptocurrency. Consequently, the country and its export-oriented companies can have better predictability with respect to trade and payments.

In addition to future innovations in the cryptocurrency space, with the right set of regulations it can also lead to job-creation and economic growth. Thus, cryptocurrencies and blockchain have a significant and effective potential to fuel India's goal of becoming aatmarnirbhar.

Giving thought to the same, government too has altered its stand on the cryptocurrency. The government has come forward to state that they are not closing their minds to the innovative, lucrative idea but are effectively looking at ways in which experiments can happen in the digital world and cryptocurrency. In fact, the plan is to ban private crypto-assets while promoting blockchain: a secure database technology that is the backbone for virtual currencies but also a system that experts say could revolutionize international transactions.

However, we will have to wait and watch to see whether the scales will tip in favor of the volatile money or fall in government's protectionist lap. In hindsight, cryptocurrency is the bus that the Indian government cannot afford to miss. Therefore, calibrated response and regulations of crypto currencies would be far more effective than imposing a toothless blanket ban on its trading, mining and possession.

Sonam Chandwani

Managing Partner at KS Legal and Associates

Sonam Chandwani founded KS Legal & Associates in 2013 with the vision of having a client-driven firm which offers proactive and feasible legal solutions.  

She had an experience of working with a leading engineering and trading company, wherein she oversaw high-value disputes, advised company management and led the company's legal functions. Sonam has focused on complex litigation and advisory for over seven years, with extensive experience in the areas of Arbitration, Insolvency and Bankruptcy, Banking and Finance, Real Estate Disputes and Corporate Litigation, to name a few. Her combination of substantial litigation experience and in-house responsibility positions her to understand needs and earn the trust of clients, both in contentious disputes and proactive risk avoidance.

She is especially noted for her exacting attention to efficiency in litigation, both in controlling costs and in being selective about avenues to pursue in litigation.

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