Cryptocurrency and its Emergence
Year 2017- Bitcoin was in the headlines as its value reached more than 3,000 USD. It still seems to be relatively new to people, but Bitcoin has actually been around since the year 2009 and has been mined and used ever since all over the world.
Ever since 2012, Bitcoin transactions of small scale have already been taking place within India. Those were still early days when only hobbyists and crypto enthusiasts showed interested in this new technology. In the year 2013, Bitcoin established itself as a well-renowned entity and achieved a certain level of popularity that spread throughout many countries. That was the year when a few businesses started accepting Bitcoin as a payment option. Kolonial, a pizza shop from the vintage era in Mumbai was the first restaurant service in the country to have accepted Bitcoin payments.
It only took a short space of time for cryptocurrency exchanges to emerge in the country. The emergence of cryptocurrency opened new financial avenues for Indians. It became easier to participate in trading activities worldwide. Pioneers of this industry like Unocoin started offering cryptocurrency trading services and exchange in India. Over time, others like Zebpay, Bitbns, and Koinex joined the party.
Digitization and Demonetization
With the new Prime Minister Mr. Narendra Modi making particular emphasis on digitizing the entire nation by providing access to the Internet to people throughout the country, the use of cryptocurrency increased in the government to a point where it was not only for hobbyists. People saw this as the next big thing and boarded the bus to this revolutionary technology.
On the 8th of November, 2016, Prime Minister Modi announced the beginning of a demonetization policy. This new policy included a rule that all Rs.500 and Rs.1000 should be withdrawn from circulation. This was an effort aimed at putting a check on the counterfeiting of the Indian currency. This was also a major step against the circulation of black money in the country. Approximately 86% of the nation’s paper currency was demonetized, and Indians began the search for alternative currency modes. The people of the nation, especially those who belong to the bracket of the 40% of the country who have internet access, began to show interest in cryptocurrency and started seeking investments in Bitcoin and other similar cryptocurrencies.
The RBI Ban on Crypto
In the year 2017, the government set up a panel led by Subhash Chandra Garg, the economic affairs secretary in the ministry of finance. The committee holds the opinion that cryptocurrency might have a negative and destabilizing impact on the fiat currency of the nation- the Indian Rupee.
By proposing the idea that Bitcoin or any cryptocurrency could have an adverse impact on the Indian rupee monopoly of the country, a new chapter has been introduced by the government in the story of bitcoin in India. In the year 2018, the Central Bank of India (RBI), banned other banks from facilitating the transactions of cryptocurrency on any of the exchange platforms.
This move ended up cutting off the access of such platforms to any banking services. It was also the first decision made by India in the censorship of the cryptocurrency industry. Aggrieved stakeholders reacted to this prohibition by deciding to seek redress in court to practically no effect.
Many banks throughout the nation started issuing warnings to their users to stay away from transactions of Bitcoin and other cryptocurrencies in every way. Many banks shut down the accounts of customers who had made transactions of cryptocurrencies.
Various people used social media to raise their voice against this conservative approach used by the government. People were afraid that the nation might fall behind and miss this great chance to capitalize on this paradigm-shifting innovation.
The Future of Cryptocurrency in India after the RBI Ban on Crypto
There exist roughly 10 major cryptocurrency exchanges in the nation with a combined user base of approximately 5-6 million users.
The concerns voiced by the Indian government are, however, not entirely baseless. You can potentially exploit a crypto platform for money laundering and tax evasion. However, on the other side, these transactions that are illegal will only end up increasing with a ban. In case of a ban, the unlawful activities and transactions involving cryptocurrencies will become much harder to track.
One major cryptocurrency exchange of the nation, Zebpay, also announced that they would be stopping their exchange activities. The restrictions on bank accounts have severely impacted the exchange as well as the customer’s ability to make transactions.
The Indian government may be right with their concerns. But, the actual RBI ban on crypto might turn out to be premature. It might very well end up as a bad decision in the long run.
Seeing the unrest amongst the masses, The Supreme Court has decided given a new date to listen to the voices of the people and their petitions against the crypto banking ban by the Central Bank of India (Reserve Bank Of India). The RBI issued a circular in April 2018 which resulted in a ban of all regulated financial institutions from providing any services to crypto businesses. The RBI ordered all the banks in the country to close the accounts of crypto exchanges by July 2018.
Is banning the only solution?
Finally, banning the cryptocurrency activities is not the solution. The only way that this system will work with minimum downsides is to have this work under a well-regulated framework. Such framework must then also govern every movement and clearly define the entry and exit points, along with the requirements from the user and exchange.
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