With the government announcing the introduction of the “Cryptocurrency and Regulation of Official Digital Currency Bill” (2021), discussions around the pros and cons of digital and unregulated cryptocurrencies are at an all time high.
The draft bill is clearly an attempt to not only regulate, but to impose a blanket ban on the various “private” cryptocurrencies in the market—a move which can be seen more as a knee-jerk reaction to the ills that these digital currencies bring along with them.
There is, thus, a need to look beyond the hype and fear around cryptocurrencies, and to adopt a more accommodative stance in policy decisions regarding these currencies.
The draft bill that the government is set to introduce intends to create a sovereign, “central”, digital currency, and subsequently ban all the private ones in the market. Before this, the RBI (Reserve Bank of India) had put out a circular in 2018 which prevented banks from dealing in any cryptocurrencies.
Crypto Markets Have Seen Unprecedented Growth
All these point towards a deep mistrust in these unregulated currencies. This can prove counter effective as the crypto market has grown by 500% since January 2020, the growth further accentuated by the Covid-19 pandemic.
Bitcoin prices skyrocketed to $65,000 as of April 2021. Since India was late to join the previous digital revolutions at the turn of this century, we must embrace this new wave of digital revolution.
As the transactions take place over the Internet, cryptocurrencies have proven to be time saving. Apart from that, they are also cost-effective since they save up the charges taken by intermediaries, such as banks, and the transactions can happen securely due to the deployment of the block chain technology.
If we approach the crypto market with a sense of unfounded fear, lock chain entrepreneurs and investors would stop investing here. This would serve as a body blow to the startup ecosystem in the country, which is already in its nascent stage.
Regulate But Don’t Impose A Blanket Ban
Moreover, we would never be able to deploy the block chain innovation in other areas such as governance, and data management.
Like all good things, crypto currencies have their flaws as well, but these need to be checked with appropriate policies and laws. A complete ban is not going to be the answer going forward, and clarity in vision is required on the part of the law-makers.
The solution lies in regulating these currencies so that the traditional financial system is not overwhelmed by the market volatility that is inherent to crypto currencies. The question of free choice would also crop up if investors are discouraged or disallowed from investing in this market.
Strong KYC (know your customer) norms and taxability would help in preventing crimes such as money laundering and theft. The world today has accepted crypto, albeit with some regulations, and it is time for India to do so as well.
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The author is an English literature postgraduate from Jamia Millia Islamia, New Delhi. He is interested in financial and political news, with a knack for research and investigation. He talks about poetry, theatre and Indian classical music when he wants to sound cool.