View: Let’s be less cryptic with cryptocurrency



Do crypto boys know something we don’t know? Bank after bank has blocked payments for cryptocurrency transactions. RBI has – first obliquely and, more recently, directly – expressed its suspicions about what it calls “private virtual currencies”. Anurag Thakur, who as deputy finance minister was the only government official surprisingly cryptocurrency-friendly, now heads the Sports Ministry.

A crypto bill hangs like a sword with no clue as to what the bill would say. And, a week ago, China, a large crypto mining base, banned all trades, forcing many miners to sink. All of this can disrupt any market.

However, the crypto crowd in India is unfazed. Serious traders as well as newbies, young people and retirees are buying cryptos using e-wallets (an expensive option) and small banks, which have yet to crack down on transactions.

Crypto exchanges advertise to attract more investors. At least one of them has raised funds from foreign private investors who, although aware of regulatory risks, are motivated by FOMO – “fear of running out” – the syndrome of the startup world that drives investors in venture capital to seek the next unicorn in the arms of young entrepreneurs.

Trade is flourishing amid the veiled regulatory warnings, legal loophole, payment hurdles, volatility and sheer ignorance of millions of investors who are emboldened by the price rebound after every bad news. They are not shaken by China’s drastic ban on all crypto-related transactions. They believe that even if China, which had failed to ban cryptos before, succeeded this time around, miners in Iceland and other countries with cheap electricity would step in.

Indeed, some of the young local investors I’ve spoken to are delighted with reports that U.S. Federal Reserve Chairman Jerome Powell has said he has no plans to ban cryptos, and said he had “misspoken” about a central bank digital currency (CBDC). replace cryptos. These investors even find El Salvador’s plan to mine bitcoin – which the country now considers legal tender – “just brilliant.” It’s surreal.

Powell’s position does not resonate with India. Probably very few monetary authorities in the world can afford what the central bank of a country with a fully convertible reserve currency known to be at the forefront of innovation can do.

In fact, two months ago, RBI Vice Governor T Rabi Shankar said, “It is not clear what specific need are these private VCs (virtual currencies) that official money does not meet. may not respond as effectively, but that in itself may not come in the way of their adoption. If these VCs are recognized, national currencies with limited convertibility are likely to be threatened. ‘ Unless you call the cryptos gold fools, RBI has rarely been so unequivocal on a matter, despite the Supreme Court overturning a previous restraining order from the regulator.

The point has been largely missed with most media reports focusing on RBI’s plan to launch a CBDC – no different than a fiat banknote in your wallet – rather than the attack on cryptos. Thus, the party continues with more than 1.5 crore of investors having invested a few billion dollars.

So what is everyone betting on? While RBI may be stubborn about the rules, New Delhi will win out over the regulator. India will refrain from an outright ban like China – in particular, with many global venture capital fund managers preferring India over China after the latter crackdown on fintech companies. Cryptos, after all, are a cocktail of finance and technology. A bad signal can spoil the party that may have started with Zomato’s IPO.

And in the event of a sudden ban, savvy traders may have a plan B: keep cryptos in their personal wallets, spot buyers overseas, and park the money overseas, which small investors can’t. to afford. And despite the frenzy, the side effects of a crash or scandal in crypto (relative to other asset classes) could be small. So, why worry?

But it is time for madness to find a method. The bill, after taking RBI’s concerns into account, is expected to be considered in the winter session of Parliament. Disclosure rules for all crypto assets – including personal wallets, hard drives and USB drives – and peer-to-peer transfers need to be set to address money laundering fears. An information sharing agreement with foreign stock exchanges to obtain the identifiers of traders who deal with their Indian counterparts in cross-border peer-to-peer transactions needs to be initiated.

The history of crypto may or may not end badly. But GoI cannot be seen not playing its part.


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