Mumbai: A ban on cryptocurrencies like Bitcoin may result in wealth erosion for about 1 crore Indian investors, including 10 lakh traders, who are estimated to own assets collectively worth over Rs 10,000 crore. Crypto entrepreneurs said that a ban won’t just hurt their business but also lead to gains for foreign firms and increased action on the black market.
A complete ban will force self-regulated exchanges to shut down, said Nischal Shetty, co-founder & CEO of WazirX, one of India’s largest cryptocurrency bourses. “It will also eliminate possible data avenues for the government and regulators around the crypto ecosystem. A ban would lead to increased liquidity for the black market and push people to transact in cash for buying and selling Bitcoin,” Shetty told TOI.
The government should look at regulating cryptocurrencies instead of a complete ban, investors and cyber law experts told TOI. Indian investors, however, will not face prosecution for prior actions if a ban is implemented. The value of a single Bitcoin was at $58,000 on Sunday and its market capitalisation was $1.1 trillion — which would make Bitcoin the sixth most valued stock had it been a company.
Shetty said a ban is not a solution and that is primarily why the US, the UK and Singapore are working on regulation. “There are over 340 crypto startups in India. A ban will erode wealth and also prevent India from participating in this innovation,” Shetty added.
In March 2020, the SC had quashed a 2018 RBI circular, which restricted investments in cryptocurrencies. Since then the popularity and value of Bitcoin, the oldest and largest cryptocurrency, has risen exponentially, driven by a crash in interest rates globally. Bitcoin attracted institutional investors looking for higher returns and a hedge against inflation. This led to an over 400% surge in its price in a year. Tech-savvy millennials too rode the wave, encouraged by popular voices like Tesla CEO Elon Musk and Twitter CEO Jack Dorsey.
Supreme court advocate and cyber law expert N S Nappinai told TOI the issue is about permitting or banning crypto ‘assets’ — as terming them as ‘currencies’ may be misleading. According to her, the government must take a decision after evaluating its concerns, and check if regulation will be better suited.
“Even a regulatory framework was considered restrictive but it ensures protection for all — be it the government, an entrepreneur or an investor. The certainty, transparency and protection that regulation provides make it the preferred option,” Nappinai said.
Pavan Duggal, also an SC advocate and a cyber law expert, said that India should tax the digital assets. “A ban is not likely to meet with success due to the nature of the internet. It will be better to come up with detailed parameters to regulate and benefit from the crypto ecosystem,” Duggal said.
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