The world has been moving towards the digital revolution each day. With corporation and governments moving to better financial solutions and services with Blockchain, India’s proposed blanket ban on cryptocurrency has now shown its first signs of an anticipated brain drain. The proposed ban, currently in the form of draft legislation which criminalizes domestic crypto investments, has been waiting for its formal review process by the lawmakers.
Death of crypto generation?
According to reports, in 2017, RBI was considering a proposal to introduce its very own Bitcoin called Lakshmi. However, it was not long before the government shunned their idea and decided to ban the virtual currency. The policymakers, in their stance against cryptocurrency, proclaimed that the dealing of digital currencies within the nation would not only be outlawed but also would charge high penalties from its defaulters. The draft ‘Banning of Cryptocurrency and Regulation of Official Digital currency Bill 2019’ proposed a ten-year term of a prison sentence for anyone who “mines, generates, holds, sells, transfers disposes of, issues or deals in cryptocurrencies.”
The digital trade-in assets were in the regulatory grey area in the past. Despite its high volatility in its value, many investors took to bitcoin and even paid taxes on profits from the trades. The question that remains howsoever, how will the formation of law against crypto impact the industry? The hefty penalty and charges have already forced crypto businesses and recent startups to either opt-out from the market or move abroad as a pre-emptive measure to protect themselves.
5 million crypto-Indians
Rachna Bakhru is the Partner at RNA Technology and IP Attorneys. She says that the Indians who have invested in the crypto market have a reason to feel hard done by the proposed legislation. Not only is the term for dealing in crypto long, but it is also higher than the maximum punishment term for money laundering. She added that in her opinion, there were high chances that the proposed bill wouldn’t be passed in its current shape and form and might undergo modifications after discussion and debate on various implications.
“If the bill becomes a reality, then India would be the first large democracy to ban an innovative technology such as crypto. Over 5 million Indians own crypto assets worth thousands of crores. They’ll have to dispose it off and lose all their wealth simply,” said Nischal Shetty, founder, and CEO of the crypto exchange WazirX.
The Supreme House of India has already challenged the notification that was issued by the Reserve Bank of India prohibiting banks and financial institutions from dealing in digital assets. Additionally, the argument that the ban violates Article 21 of the Constitution of India, which gives an individual the right to carry on the profession of their choice, might not find much favor with the SC, says Shilpa Mankar Ahluwalia of Shardul Amarchand Mangaldas.
She added that the current definition of ‘cryptocurrency’ in the bill was pervasive, and seeks to ban – perhaps unintentionally – all stored value units whether or not meant to be an alternate form of currency. The far-reaching implications of the bill would probably face challenges and deserve a review by the Supreme Court.
Will our economy reach its $5 trillion mark by losing out on the $10 trillion crypto industry?
Even though the RBI previously stated that it has been researching the introduction of a rupee-backed digital asset, the draft Bill which looks forward to criminalizing crypto-dealing will likely damage India’s reputation as a technology hub, harming its standing in the Ease of Doing Business Index. India’s Blockchain sector has received a total of $5.3 million in VC funding till date, according to reports.
While local opinions differ as to whether or how the bill would evolve into a definitive law, the ET sources were very open towards expressing the negative side of the crypto ban and how it would be affecting the economy as a whole, making it a retrogressive move for the country.
Shetty said that as a nation, we are primarily dependant on the services sector and our country might lose its edge as a technological power if the ban on cryptocurrency is enforced. Rejecting this industry would mean massive job losses and a brain drain. Crypto market is predicted to be a $10 trillion industry in the coming five years, and if we are to achieve our PM’s goal being a $5 trillion economy, then crypto is essential to that vision.