MUMBAI, India — Every few years, a spate of negative headlines and events related to cryptocurrencies sends the Indian government back to the drawing board with a renewed focus on banning virtual money.
If India were to go ahead with this ban, millions of users cut off from trading and investments in the global market also risking India’s position.
Some of the most popular cryptocurrencies including bitcoin and Ethereum have been embraced by many people in India within the last couple of years.
The most recent crackdown was done by the Reserve Bank of India (RBI) back in 2018 though the Supreme Court of India later invalidated the ban in 2020. This has remained the case as the government between banning and regulating the substance has been a constant topic.
As of late 2023, several factors have prompted renewed discussions about a possible ban:
1. Regulatory Risks: RBI and the Ministry of Finance have also objected citing the issue of money laundering, terrorist financing, and the need for greater investor protection.
2. Market Volatility: Because of such extreme price fluctuations of cryptocurrency, many investors have suffered serious financial losses.
3. Environmental Impact: With India thrusting towards cutting down carbon emissions, the high energy consumption necessary for cryptocurrency mining has attracted people to raise their eyebrows.
4. Global Trends: Indian officials are watching closely what other countries are doing, as they are implementing strict regulations or outright bans.
5. Technological Sovereignty: Decentralized cryptocurrencies are seen by the government as threats to its monetary system and to safeguard against such a threat, the government intends to protect its monetary system.
The potential ban has elicited mixed reactions from various stakeholders:
– Government Officials: A complete ban is supported by many and there is a call for a strong regulatory framework that will help ensure financial stability.
– Investors and Traders: The ban is opposed by a large chunk of the crypto community, many of whom argue that the ban could tighten laws and stifle innovation while boosting the status quo for trading; they also assert that cryptocurrencies can help eliminate financial exclusion.
– Industry Experts: The benefits of blockchain technology are divided among analysts, some of whom argue that regulation, instead of a ban, could capture blockchain technology’s benefits without losing control of risks.
– Environmental Activists: Advocates calling for more strict regulations on crypto mining are echoing worries over the environmental impact of crypto mining.
Should India decide to implement a ban, several implications could arise:
– Market Decline: A ban could result in a sharp drop in the domestic crypto market and most investors lean towards foreign exchange.
– Hindered Innovation: Preventing cryptocurrencies could hinder technological developments and stop startups in the fintech arena from investigating blockchain solutions.
– Enforcement Difficulties: The problem with banning is that people just find ways to get around regulations by becoming part of a peer-to-peer transaction or foreign platform.
– Investor Confidence: Such a decision would eat away at the investor trust in the Indian financial market, possibly covering the crypto sector and even the perception of the economy.