Banning Cryptocurrency – Hard Mission for Indian Government

December 21, 2018

India’s government is preparing for plans to ban cryptocurrencies. So far, There’s no official source shows what exactly they will do against cryptocurrencies but no doubt that they have to meet incredible difficulties.

Cryptocurrencies are not bound by national jurisdiction but based on blockchain technology-a ledger which is decentralized, distributed, public online used to record transactions. Database of all deals is recorded from all around the world and managed by a global network of computer. If Indian’s government ban cryptocurrencies, it means money laundering, illegitimate transactions, and tax evasion will have a chance to escape without any traced clue.

Tough to enact

The number of users in 10 large crypto exchanges now hits nearly 5-6 million in India.

Last month, India’s finance minister Arun Jaitley hosted a meeting of officials of the country’s central bank, the market regulator, and a committee tasked with framing rules to regulate the ecosystem. They stated banning only “the use of private cryptocurrencies in India”. However, India’s expert didn’t think so, they predicted that only buying, selling, and transacting in virtual coins will be prohibited and not their possession per se.

Cryptocurrencies are stored on a cloud storage platform like Dropbox, a private digital wallet or even a pen drive or a laptop so they are not dependent on any crypto exchange wallet. For this reason, Nischal Shetty, founder and CEO of WazirX, an Indian cryptocurrency exchange has reason to believe that the decision to ban possession of government will be impossible to implement anyway.

Cryptocurrencies are not dependent on a crypto exchange’s wallet alone

The government could also try to prohibit citizens from transacting in cryptocurrencies could by cracking down on the exchanges and forcing them to down their shutters.

But even that’s successful, Shetty reminded that it can only ban the big exchanges, small and hyperlocal exchanges will possibly come up and become harder keeping track of and block them.

Besides, cryptocurrency’s nature is that can be exchanged globally which means that if investors can not exchange cryptocurrencies inland, they can do it outside. However, treated as foreign transactions and the Indian government has imposed checks and balances on such dealings.

But Diamond cuts diamond, Indian’s citizens can avoid that in many ways. They may use peer-to-peer channels to transfer their investment into the overseas exchanges. According to Tanvi Ratna, policy counsel of Incrypt, a firm that advises companies on blockchain technology, once conversing to private coins, the foreign exchange is hardly traceable and the government can do nothing but look it losing.

However, The R Gandhi, former deputy governor of the Reserve Bank of India, the country’s apex bank, also warns that government still has a core clue. Traders have to face the risk for such traders as any transaction in crypto will have to be settled in real currency, and the formal system is able to catch it, especially when it uses forex dealing.

Indian Government can block the websites of global bourses in the country to curb crypto trade in India. But even though the government’s motive to curtail the macroeconomic impact of cryptocurrencies by a ban, Investors can get away with this with only a few steps through VPN ( virtual private network).

Driving them under

But anyway, The government are reasonable to concern about cryptocurrencies.

Transaction in the dark virtual world means money laundering can appear, and also leads to price volatility. Besides, the complex nature of these digital assets is a pain point for this kind of currency with the chances of consumer frauds.

But banning the cryptocurrencies to be exchanged won’t solve that concern outright. Shubham Yadav, co-founder of Coindelta, an Indian cryptocurrency exchange had a view this situation, he said when all transactions will be in a parallel economy, money laundering and such unlawful activities will increase, and of course will not be easy to trace in case of a ban.

Ausaf Ahmad, CEO of Eleven01, a firm that deals with blockchain technology, have a speech recently. In his speech, he supposed that the only way to control these activities better is put them under a regulated framework, by clearly defining entry and exit points and requirements from users and exchanges. Incrypt also had a report released in September to suggest a framework for blockchain and cryptocurrency in India. This framework has a safeguard through stringent bank KYC (know-your-customer) of exchanges, opening banking channels, bringing legitimate crypto earning into the tax net, Initial coin offerings (ICOs) for sandbox-registered startups (a security mechanism), and having a separate regulator for blockchain.

Chinese chequers

Leaders in the economy from Asia and America such as Japan, Malta, Thailand, The US, as well as the city of Abu B=Dhabi in the UAE, are looking at the regulating this space with a positive view but some others are toughly acting on cryptocurrencies including China and Bangladesh.

China banned cryptocurrency exchanges and ICOs including financial instability associated with the likes bitcoin in September 2017. Follow this ban, all ICOs, and exchanges dealing in it as illegal. Users couldn’t convert crypto into fiat currency (and vice versa) or providing any other brokerage or commission-related services due to the forbidden of Bourses.

Despite the ban, traders and investors are betting heavily on these currencies

But, as we predicted, traders and investors jumped into the peer-to-peer trading to escape from this situation and some others shifted to more crypto-friendly jurisdictions.

it’s very interesting that the tougher ban in China, the higher volumes in terms of peer-to-peer trade in the outside of the country. It is another evidence to prove that a ban is not an effective tool for this case.

 

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