At a time when India’s digital investors are already facing uncertainty, the government may consider blocking Internet Protocol (IP) addresses from cryptocurrency exchanges or companies that trade cryptocurrencies. The same has been confirmed by a source quoted in a Business Standard report.
The move is cited as part of the government’s plan to introduce a law banning private cryptocurrencies and introducing India’s own digital currency. While the government has proposed promoting technologies like blockchain, it appears to be against people holding decentralized digital currencies like Bitcoin and Ethereum.
The government’s proposed plan did not go down well with the border blockchain and crypto industry, which saw strong growth in 2020. The industry has also stated that a ban on digital currencies like Bitcoin and Ethereum is not an option.
Even if the government blocks the IP addresses of cryptocurrency exchanges, the actions may not be easy as pie, according to industry experts cited in the report. They added that virtual private networks (VPNs) can be used by individuals to access the switches.
Why a general ban is not the solution
The government has two concerns about cryptocurrencies. The first is that cryptocurrencies are global and states have very little control over speculative activity in these assets. The second is that cryptocurrencies can be used to fund fraud, Ponzi programs, terrorist financing, and money laundering. However, crypto exchanges say banning cryptocurrencies would not address these concerns. In fact, a ban would only lead to more illegal or black market activity.
Sumit Gupta, CEO of CoinDCX, retaliates that a ban is definitely not the solution. “Smart regulation for the cryptocurrency industry will be a step to accelerate the digital India movement and make us atmanirbhar. Our expectation from the government is to regulate crypto assets “as a store of value and not as another currency,” he says.
Ajeet Khurana – also a bitcoin and blockchain expert – recently stated in an interview with CXOToday that regulating the crypto trade could also make India an attractive destination for global blockchain companies.
Earlier this month, a senior government official told Reuters that a ban on incoming cryptocurrencies was very likely and that holding cryptocurrencies would be punished with a prison sentence of up to 10 years in one of the toughest guidelines in the world.
Experts believe that a blanket ban would be stupid on several levels. In fact, enforcing the law would be even more difficult than under the Raj license. In addition, the country’s government would not be able to seize or even access the computer network around the world to mine cryptocurrency and run blockchain ledgers. More likely, his efforts will only drive the cryptocurrency market underground, which is more important.
Citizens would be deprived of the very real benefits of cryptocurrency. The ban would prevent Indians from profiting from the appreciation of crypto assets that blockchain evangelist Balaji Srinivasan had previously told Moneycontrol.com that India would be making a trillion dollar mistake by banning cryptocurrencies. The real long-term solution, as he suggested, is for the government to gradually reduce control over capital mobility and make India a more desirable destination for investment.
A silver lining?
Despite concern and uncertainty, Treasury Secretary Nirmala Sitharaman suggested during his speech at the India Today Conclave that the government would allow certain uses of cryptocurrencies and the blockchain technology they rely on.
“We are very sure that we will not close all options. We will allow certain windows to experiment with blockchain, bitcoins or cryptocurrency, ”she said.
It is estimated that around 8 million cryptocurrency holders live in India. A total ban could cause prices to drop. But investors see some light at the end of the tunnel. “We have already started working with the government and other stakeholders at various levels. We are open to discussions on this topic or to research activities that will help create favorable regulations for the industry, ”says Gupta.
India receives the highest inflow of global remittances, and Indians could save billions in remittance fees by using blockchain networks. Meanwhile, elite Indians will flee the country with options, taking their wealth and innovations with them. Just like in the 1970s and 80s under the Raj license.
“By incorporating a measured mix of international best practices, existing national regulatory systems and some new regulations, the Government of India can encourage the use of cryptocurrency in the country,” said the Internet and Mobile Association of India.
Just as liberalization in the 1990s made India a world leader in IT and kept opening up, regulations could push India to the limit of fintech innovation. Instead of an outright ban, the government should therefore carefully examine India’s restrictions on financial transactions and bring them in line with the changing world.