India is looking at replacing the likes of Bitcoin and Ethereum with a digital version of the rupee.
Cryptocurrencies, in general, and Bitcoin, in particular, began garnering wide public interest and attention for the first time in late 2016 through early 2017, as the digital currency began flirting with the $20,000-mark in value. This was the first time since Satoshi Nakamoto released Bitcoin in January 2009 that this deregulated virtual currency was viewed as a viable investment and trading option for people across the board rather than just a concept for tech geeks to toy with.
Three years and several bullish-bearish rides later, Bitcoin finally breached the $20,000 mark in Dec 2020. One tweet and a little interest from tech tycoon Elon Musk was enough to carry it to the $50,000-mark in just over a month, thereafter.
The crypto market is seeing an unprecedented boom – one that Indians will not be able to reap the benefits of. Thanks to a government legislation in the works.
The Rise and Rise of Bitcoin
On February 8, Bitcoin saw a momentous leap in value, inching close to the $50,000-mark, following an investment by Musk’s venture Tesla. The move bolstered the cryptocurrency world, legitimizing it as a mainstream asset for money managers and corporations, and not just individuals.
This sudden jump in value has placed Bitcoin’s growth at a whopping 1150% since March 2020. Retail traders are now having a field day trading the most popular cryptocurrency that was valued at less than $1,000 just five years ago. Of this meteoric rise, 20% came in a single day following Tesla’s $1.5 billion investment in Bitcoin and an announcement that it would eventually start accepting the cryptocurrency as a mode of payment for its cars.
Find more statistics at Statista
As the cryptocurrency registered its single biggest daily rise since 2017, its value was pegged at $48,216 – this means you can now buy one of Tesla’s best offerings, the Model Y SUV, with just one Bitcoin.
Bitcoin wasn’t alone in this bullish ride. Its closest competitor, Ethereum also reached a record high of $1,784.85, the following day.
India Won’t Ride the Bitcoin High
The Indian government’s reservations vis-à-vis cryptocurrency has been no secret. Talks about regulations have been rife in the public space and a bill on the matter has been a long time coming. The Reserve Bank of India (RBI) has prohibited banks from processing transactions involving cryptocurrency in 2018. A measure that stayed in place until it was overruled by a Supreme Court ruling in March 2020. For the past year, crypto has been back in business in India.
However, the happy run seems to have been short-lived, as the central government has finally made public its intent to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the ongoing Budget session. According to Finance Minister, the bill will be based on the recommendations of the inter-ministerial committee (IMC). Interestingly, the IMC has suggested a blanket ban on cryptocurrencies like Bitcoin and floating an official digital currency regulated by the RBI.
Govt-approved Digital Currency is an Oxymoron
As per the statements given out by India’s Finance Minister Nirmala Sitharaman and her deputy, Minister of State Anurag Thakur, in Parliament, India is apparently looking at replacing the likes of Bitcoin and Ethereum with a digital version of the rupee. The process of putting in place a ‘facilitative framework’ that would allow the RBI to develop and roll out India’s official currency underway.
However, this goes against the very basics of cryptocurrency, which is to liberate money from government control. Unlike fiat currencies that are controlled, generated and circulated by governments, crypto is a decentralized network facilitating peer-to-peer payments free on government authority or control of middlemen.
Watch: Anurag Thakur says India to bring Cryptocurrency Bill soon
Where Do The Existing Indian Investors Stand?
Those who have already been investing in cryptocurrencies such as the Bitcoin will, naturally, be the hardest hit by this bill. If the Centre does draft its bill along the lines of IMC recommendations, as indicated, it’d become illegal to trade in Bitcoin and Ethereum in India. If past recommendations of the govt panel from 2019 are anything to go by, violators risk jail terms of up to 10 years, heavy fines or both.
However, analysts believe that existing investors will be given a timeframe to exit their assets before the ban is put in place. Even so, they must brace themselves for the possibility of coughing up heavy penalties for legalizing any assets or profits accrued via cryptocurrency trading.
The nitty-gritty of India’s cryptocurrency ban will come to be known only after the bill is tabled in Parliament. However, given the present government’s tendency to regulate and control every aspect of its citizen’s lives, it’s not a hard guess how the crypto bill will pan out.