Are cryptos really banned in India?
What will the future bring? We know that cryptocurrencies aren’t going anywhere as a technology, but as a viable investment? That remains to be seen. In India, the latter is becoming less and less possible. Of course, you have commentators and eternal optimists saying that it’s all just FUD, it’s people misreading the facts, cryptocurrencies are still legal in India, and so on. But that is not what matters. What matters is what people think and what the overall climate is when it comes to crypto investments. In India, it is a climate of uncertainty, marginally even open hostility. But why now? Well, you’ll have to forgive us our poetic liberties, but it’s a tale as old as time, song as old as rhyme, of strict government regimes suddenly tightening their grip on decentralized cryptocurrencies before introducing a state cryptocurrency. If you want somebody to drink your pond water, you have to get rid of the alternatives – squash the competition, if you will.
On Friday, the Reserve Bank of India, the country’s chief financial authority, forbid all banks, financial institutions, and lenders in the country to do business with or to service cryptocurrency owners and traders. Also on Friday, the central bank of Pakistan released a statement, declaring that all cryptocurrencies are illegal in the country, and transferring funds outside the country’s borders using cryptos is now a crime.
In India, many were blindsided by such a broad move that targets all crypto users instead of investigating potential misuse. Commentators estimate that the 4-5 people in India who own cryptocurrencies are now sitting on dead assets. If they try to transfer their crypto funds, their bank accounts will get shut down. Of course, crypto users could choose to operate completely independently and shun Indian banks altogether, but we’re talking about a country where cryptocurrencies are not as well implemented as in Japan or the U.S. Even more importantly, Indian crypto owners will have a hard time finding businesses and retailers willing to accept cryptocurrencies. Although they are not banned outright, using digital assets is now next to impossible, just like buying or selling them for fiat currencies.
In the face of these limited options, crypto users are forced to play along. The RBI has specified a grace period of three months, beginning with Friday’s announcement, during which individuals and companies can either sell off all of their crypto assets or move their businesses overseas. Although most major Indian exchanges have already registered their corporate offices in other countries, individuals selling off their digital assets over the next three months might slow down or completely hinder the prices of BTC and other cryptos from recovering. Some economists believe that no such thing will happen, since they expect to see Indian crypto enthusiasts turn to over-the-counter cash transactions and peer-to-peer trades, both notoriously hard to monitor and regulate.
It is all a prolonged game of chicken, and whether the RBI is bluffing or not, some will definitely tap out, especially now that the government seems to be raising the stakes. One day before it announced that it was prohibiting financial institutions for providing services to crypto owners, the Reserve Bank of India (RBI) revealed that it was working on a state-issued, central bank digital currency. The central bank has set aside a taskforce to tackle the problem, joining more than 90 central banks worldwide which have already done the same.
The new trend of state-issued cryptocurrencies will certainly grow to become one of the more contentious issues of our time, and old-timers like Bitcoin, that value decentralization and anonymity, will either step aside, frightened by the headlights, or thrive, in case more and more people choose to shun government surveillance and oversight in favor of true financial freedom.