A cryptocurrency is a form of digital money that is decentralized and based on blockchain technology. According to CoinLore, there are over 5,000 various cryptocurrencies in circulation. You may be familiar with the most popular versions, Bitcoin and Ethereum.
Although many people invest in cryptocurrencies as they would in other assets such as stocks or precious metals, you may use crypto to buy conventional goods and services. While cryptocurrency is a fresh and interesting asset class, investing in it can be risky because you must conduct extensive research to properly comprehend how each system operates.
Is India going to ban cryptocurrency? Will bitcoin trading be lawful even if the country outright bans it? What kind of ban, if any, will India implement?
These are some of the concerns that cryptocurrency investors and others with an interest in the market have been pondering in recent months. However, a more pertinent concern is whether the government has the authority to outlaw cryptocurrency in the first place. And whether a ban would be an impact on the industry’s capacity to continue what it is operating. You might be surprised by the response.
Many experts believe that cryptocurrencies are just pieces of computer code, they cannot be banned. Transmitting cryptocurrency from one wallet to another is similar to exchanging music on a USB drive, thus a legislative ban will not prevent people from sending cryptocurrency to one another.
However, the government might always erect impediments to admission. Most consumers in India, for example, trade on exchanges since they don’t comprehend the technical side of building crypto wallets and other related issues. The government could make it harder for mainstream users to trade in crypto if these sites are banned, which leads us to the second concern.
Cryptocurrency’s ban is a horrible idea.
If mainstream users are unable to trade on exchanges, they will seek other options. Transferring crypto can be as humble as sharing a movie on a USB flash drive, as previously stated. People might technically simply find someone ready to transfer the fiat equivalent of a specific quantity of bitcoin to their bank account. To put it another way, crypto illicit market trade.
To put it simply, black market trading entails locating persons willing to exchange fiat currency for cryptocurrency. This was as simple as being active on famous crypto forums in the days before exchanges, and it should be the same now. Because India has such a limited crypto user base, sellers would be able to sell to anyone in any country as long as they receive the fiat equivalent in the currency of their choice.
Many believe that banning cryptocurrencies in India will just strengthen the country’s illicit market trading, which flourished before crypto exchanges rose to prominence. The prohibition may reduce the number of purchasers for cryptocurrency in Indian rupee on any exchange, leaving existing crypto holders with little choice but to sell their holdings elsewhere.
During next year’s Budget Session of Parliament in February, the Indian government is expected to introduce a new bill to regulate cryptocurrencies in the country. The draft, which was shared previous this year, prohibited private cryptocurrencies and allowed the Reserve Bank of India to launch its own cryptocurrency (CBDC).
However, with a growing number of cryptocurrency investors in the country and a blooming ecosystem of blockchain applications, outright bans on cryptocurrencies may not be the best option even in the future anymore.
Consequential Harm
Furthermore, the crypto business is a driving force behind much of today’s global innovation. Many financial goods, as well as other things, are made using the blockchain technologies designed for these currencies, particularly the Ethereum and Bitcoin chains. According to experts, if the restriction is enacted, public blockchain-based goods may become hard to develop. In other words, if the government says you can’t use Bitcoin, the currency’s fundamental blockchain becomes illegal as well. At least, that’s what many people believe will happen.
This could stifle innovation in the blockchain business since companies would be forced to build their own blockchain platforms from the ground up, which will cost a lot more money and effort. It’s also like reinventing the wheel, and there’s no assurance that the industry can come up with better solutions than what’s already there.
If India follows a rumored cryptocurrency ban, it will not be the first time the country has attempted to impose currency controls. This while, though, a ban is far less possible to succeed, and the economic ramifications for India’s economy could be even worse. The country should not repeat the same error.
Instead of considering criminalizing cryptocurrencies, the government should examine India’s financial transaction limitations and bring them up to date with the changing world. India became a world leader in information technology after liberalization in 1991. Opening up, even more, may put Indians where they belong: on the cutting edge of fintech innovation, not on the receiving end of suspicion.
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