Decrypt: Ban won’t work, regulation will

NEW DELHI: Should India embrace a crypto future, is a question on everyone’s mind Well, for starters, the G20 will serve as a platform for India as big economies are exploring whether the group could collectively regulate cryptocurrencies. Finance Minister Nirmala Sitharaman stated that this line item was surely on the agenda.

While the needle tilts towards a proactive approach to the much tainted virtual asset, the confusion still appears to rule supreme in India regarding digital currencies. Although the government has yet to draft, much less adopt legislation on the subject, the governor of the nation’s central bank has advocated for its outright ban.

A glimmer of rationality comes in as Union Minister of State for Electronics and Information Technology Rajeev Chandrasekhar stated “There is nothing now that makes crypto illegal as long as you follow the legal process.” T Rabi Sankar, deputy governor, Reserve Bank of India (RBI), however, suggested that banning cryptocurrencies was the wisest course of action for India since they were worse than Ponzi schemes. Shaktikanta Das, governor, RBI, concurred that cryptocurrencies lacked the fundamental worth of even a tulip.

The RBI’s position, in my opinion, is not thought through and puts it on the wrong side of history.

First off, it would be impossible to enact a ban. China’s central bank announced in September 2021 that all cryptocurrency transactions will be prohibited, thus outlawing virtual currencies like Bitcoin. Beijing had made seven attempts to rein in the rapidly expanding international industry. And yet, China returned to the top 10 nations adopting Bitcoin less than a year later. This strongly implies that the ban has not been effective.

In light of this, and to reassure the RBI regarding cryptocurrency, the industry needs smart, effective regulation rather than a prohibition or the exorbitant levies it has already imposed on digital tokens. The Blockchain Governance Council, India, has put across several recommendations around this and continues to do so.

Cryptocurrencies will unavoidably play a bigger part in the global financial system as more institutional investors, such as pension funds, mutual funds, investment banks, commercial trusts, and hedge funds, as well as private investors, increase their exposure to the market.

However, the industry is still nascent and unstable and therefore, crypto must be included in the regulatory fold and held to the same standards as the rest of the system in order to prevent widespread disruption to the safety and soundness of the larger global financial system. It is also undeniable that more oversight would help protect investors overall both now and in the future after a year of notable crypto business bankruptcies, allegations of high-level fraud, and prison terms for insider trading. This is significant as India frequently ranks among the top countries in a number of international cryptocurrency ranking indices, including those measuring first-time investors and crypto adoption.

Now that India is in charge of one of the most significant global inter-governmental forums, Indian officials have a golden opportunity, especially given the population’s forward-thinking attitude on this matter and government should now take the initiative on this matter as part of its agenda. The Indian economy of the future and the nation will thank them for it.