Cryptocurrency This Week: Crypto Ban Will Mar Blockchain Innovation, Industry Tells Indian Govt

In India, there are over 200 blockchain startups with many of them operating in the cryptocurrency space. In 2017, India’s crypto industry was estimated to have a cumulative value of nearly $13 Bn. That was before the Reserve Bank of India’s banking ban on cryptocurrency companies. Since the lifting of the ban, some of India’s noted cryptos startups have reported a 400% increase in trading volumes and user signups. Another ban will distort the industry and adversely affect the startups in India.

These are some of the key observations made in a representation sent by some of India’s leading crypto companies, including those founded abroad, to RBI and the Ministry of Finance last week, in a bid to assuage the government’s concerns with cryptocurrency and convince it to reconsider a complete ban on crypto. 

The representation, a whitepaper prepared by the Internet and Mobile Association of India’s Blockchain and Crypto Assets Council, uses India’s well-documented ambitions to climb up the Global Innovation Index (GII) rankings as a crutch to argue why a ban on crypto would be a bad idea. The document highlights that banning crypto’s legitimate use cases would mean falling by the wayside in exploring emerging the use of emerging technologies such as blockchain and artificial intelligence (AI). 

The document makes further points about how bans in India often lead to the proliferation of a shadow market, citing examples of India’s ban on drones and on the import of gold, both of which were later overturned and regulations brought in. More information about these two points can be read here. 

Other reasons given in favour of cryptocurrency include their potential use for enhancing financial access. The document claims that crypto could be instrumental for micro-finance, because of its underlying features such as transparency, speed and low transaction costs. It also talks about crypto wallets that can be used to transfer or receive cryptocurrencies for those without a bank account, to ensure faster remittances. Although, advocating the use of cryptocurrencies for domestic remittances for the un-banked population doesn’t help anyone’s case, considering the low degree of financial and tech literacy, as well as the volatile nature of cryptocurrencies. Moreover, UPI payment apps have already emerged as a convenient solution for the peer-to-peer transfer of funds. Perhaps, faster remittances will be one of the prominent use-cases of RBI’s planned Central Bank Digital Currency (CBDC). 

The document then compares Bitcoin with India’s stock market indices to highlight its usefulness as an asset class. In 2020, Bitcoin offered a 302.79% return on investment (ROI), as compared to NIFTY 50 at 14.77%, Sensex 30 at 15.60% and NIFTY Small Cap 100 at 20.62%. 

“In a regulated market, crypto exchanges will play a crucial role by ensuring compliance to KYC and AML guidelines and mitigate illicit activities in digital currencies. The rise of cryptocurrencies and blockchain is an exciting opportunity, and India should look to capitalise on the ground-breaking potential of this technology to advance its global position as an IT power,” the document sums up. 

Global peer-to-peer crypto exchange Paxful explained why leading crypto companies had to draft a 23-page document and present it to the government, to make their case for crypto. 

“What we see around the world is that because cryptocurrencies are a new concept for many people, there are a lot of misconceptions. For example, one of the major concerns voiced by the Indian government is about safety and how to ensure that they are not used for criminal purposes. Because cryptocurrencies are powered by blockchain technology, they are inherently transparent. In addition, they can be regulated like fiat currencies so we’d recommend strong Anti Money Laundering(AML) measures,” a Paxful spokesperson told Inc42. 

“A communication gap meant that maybe the cryptocurrency industry was unable to engage with policymakers and answer any questions and concerns. It’s important for there to be open dialogue so we can share knowledge and experience and work together on what’s best for India,” the spokesperson added. 

Bitcoin & Ethereum Prices

At the time of writing, Bitcoin was trading at $58,735, a 0.87% decline in price over the last seven days. 

Ethereum was trading at $2,118, a 14.62% increase over the last seven days. 

Other News

WazirX Crashes 

Leading Indian crypto exchange WazirX crashed on Sunday night, a fault the company attributed to high trading volumes and the company’s existing backend infrastructure unable to handle the same. The company’s founder and CEO Nischal Shetty acknowledged the same on Twitter. “No matter how much you prepare for traffic, some system loads are crazy. Wallet is safe, yes. The load on our systems are way too much. Scaling is taking longer,” he wrote. 

Crypto Market Cap Cross $2 Tn As Ethereum Surges

The value of the cryptocurrency market topped $2 Tn for the first time on Monday. Talking about the same, CoinDCX founder and CEO Sumit Gupta said: “One of the prime examples of large institutional investment is the latest bitcoin purchase worth $15 Mn by Microstrategy. We have noticed that investors are heavily looking at other cryptocurrencies and moving beyond Bitcoin and Ethereum. It is indeed a decisive vote of confidence on the entire cryptocurrency asset class. Cryptocurrency as an asset class has always managed to outperform the traditional asset class massively and grow even in these uncertain conditions.”

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.