Many crypto enthusiasts in India celebrated the lift of ban on cryptocurrency trading by the Supreme Court of India in March of 2020.
Now, the Government of India has surprised the citizens by proposing a new law to ban crypto.
Economic Times remarked this as “a blow to investors, exchanges and other entities dealing in virtual currencies.”
According to the news, “The draft law prepared by the committee said any direct or indirect use of cryptocurrency will be punishable with a fine or imprisonment, which shall not be less than one year, but may extend up to 10 years.
As per the draft law, a repeat offence will be punishable by imprisonment of up to five years, which could extend to 10 years with a fine. The fine could be three times the loss or harm caused by the person, three times the gain made by a person, or up to ₹25 crore.”
Rs. 25 Crores translates to approximately $3,333,333. For someone in India that is a hefty price to pay for dabbling with cryptos.
If this ban carries out, it might push India backward by 10 years in the blockchain and digital asset front.
Government’s job is to anticipate the future and prepare
the country for it
The Government of India under its new leadership has been a force of forward-thinking, however, when it comes to bitcoin and cryptocurrencies it has always been apprehensive in its approach. First, they tried to shoot this down with a ruling from the Reserve Bank of India and when the Supreme Court of India took that ruling down, the government is now planning to introduce a law that could make this ban permanent for a long time.
While countries like the US have adopted do no harm policy, other countries like Switzerland, South Korea and Japan have been very proactive in becoming the dominant force in the blockchain and crypto space by building inclusive legal frameworks.
It is unfortunate that instead of looking at progressive countries as role models, India is looking to emulate Russia and China stances on crypto.
Denying a defining opportunity for the country
Blockchain can work without crypto but its true potential will be thwarted without utility tokens.
This ban could force the companies building out awesome projects to close their shops because you are taking out a critical essence of the functionality from the technology.
According to LinkedIn’s India’s top-emerging job sector report, Blockchain has been one of the forerunners. Now, a hostile attack on Crypto could send the companies that were thinking to establish their Blockchain IT hubs in India to look elsewhere.
Guidelines and rules instead of a ban
There should be a framework around cryptocurrencies.
An outright ban is not going to accomplish much except denying the opportunities to the individuals who follow the law.
Countries like Switzerland, South Korea and Japan are all busy building a friendly framework for the companies to innovate freely in the blockchain and crypto space. Malta has been particularly darling for the crypto exchanges with its friendly regulations.
The countries that have proposed a ban have all been places where ‘might rules’, and it is unfortunate for India to be going that route.
A ban could backfire and hand over keys to fraudsters
A ban will actually make Bitcoin and Cryptos more dearly because people can actually use it to hide their wealth. Transactions that happen through exchanges are MORE transparent than off-chain/masked. These off-chain/masked transactions will happen in spite of the ban.
Essentially, the ban will punish the upright citizens and not those who it is trying to target through this law.
Swiss accounts are held by more politicians, crooks and fraudsters than a regular citizen. Why was a ban not established on that?
If you say that there is a disclosure requirement then the answer is, in spite of the need to disclose, fraudsters with means will find ways to open Swiss accounts and route their ill-earned fortunes.
Banning crypto will essentially do the same thing for those who want to break the law.
Why not find ways to catch those criminals while letting the socially conscious citizens the opportunity to participate in the crypto economy. More importantly in the blockchain revolution.
What happens to the Blockchain incubators?
States are trying to become the hub for blockchain projects and the Central government is taking steps to ban crypto, this obvious mismatch of ideologies will prevent the companies from entering India.
There is nothing worse than lack of legal clarity for companies trying to establish their operations in a new country.
Ban will hurt more than it helps
Like we said earlier a ban on crypto means:
- Limited innovation in the blockchain projects coming out of India
- Companies that wanted to call India home for their blockchain projects could backout
- Ordinary, upright citizens will be denied an opportunity to participate in digital asset economy with the rest of the world
- Being the tech capital of the world, India will shortchange its own talent from innovating
- Those who want to cheat will find ways to – this ban will mean nothing to them
Given more downsides than upside, we really hope that India looks to South Korea, the US and Japan for inspiration instead of Russia or China.
Will it be easy for the government to carry out the ban?
Majority of Indians are not invested in cryptos. This law to ban cryptos could pass without an ounce of resistance from anyone in the government.
However, we do expect to see companies like WazirX (now backed by Binance) and other luminaries in the blockchain space to provide input to the government to not pass this law and instead pass guidelines for ‘legal trading’.
We have to wait and see as to what actually unfolds.
Thank you for reading and sharing this article. Stay safe and healthy!
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