India has always had very risky relations with its neighbors in the north. It is not an exaggeration to say that China and India have never had good relations.
India is a developing country with immense potential. India's frightening level at which it is developing has put many of its hostile nations on their toes.
The new cutting-edge technologies like cryptocurrencies and NFTs are unpredictable and unmatched in their potential, but what does it mean but the Indian crypto market?
India and cryptocurrencies
The Indian government has always been very trigger-happy about banning foreign applications and technologies when need be. However, they remain uncertain when it comes to cryptocurrencies.
According to the law, neither the use of cryptocurrencies (or other digital assets) nor the regulations that control how they are used are technically prohibited in India.(1)
The long-anticipated cryptocurrency bill, which is still waiting in Parliament's several sessions, is intended to "provide a facilitative framework for the formation of the official digital currency to be issued by the Reserve Bank of India." Additionally, this legislation will also prohibit all private cryptocurrencies except "limited exclusions to promote the underlying technology of cryptocurrency and its uses."
It is well known that Indian exchanges like Binance, KuCoin, WazirX, Kraken, Huobi, and others operate. Most of these cryptocurrency exchanges are either run by Chinese people or are of Chinese origin. (2)
As the Indian government is often very strict about Chinese influence, particularly in the financial sector, this raises many questions about why these crypto exchanges are allowed to function despite other options available.
Due to their remote locations outside India, these businesses can simply break any regulations there. They can easily avoid responsibility if a foreign crypto exchange is involved in or causes an offense to be committed in India. Additionally, it will be nearly impossible for Indian law enforcement to locate them for any investigative or legal process, even in case of culpability.
Why are companies like WazirX a liability for India?
Recently, the government announced that the Directorate of Enforcement is looking into two cases involving cryptocurrencies against the trading platform WazirX for permitting the transfer of bitcoin assets worth $2,790 crore to unidentified wallets. (3)
Investigations have shown that the walled infrastructure of the Cayman Islands-based exchange BINANCE was being used by the Indian cryptocurrency exchange Wazirx, which Zanmai Labs Private Limited runs in India. It was also discovered that all crypto transactions between these two exchanges were not even recorded on the blockchains, leaving them in mystery.
Additionally, it is noted that WazirX, an Indian exchange, has requested overseas customers to convert one cryptocurrency into another on its platform and use transfers from other exchanges like FTX, BINANCE, etc.
Many questions have been raised about these dishonest actions by the well-known exchange WazirX, chief among them being what this means for the Indian economy from China's perspective.
The role of crypto
Cryptocurrencies were developed to conduct financial transactions without primarily relying on banks or governments. The very first cryptocurrency established was called "Bitcoin." Thanks to the invention of Bitcoin, people can now conduct financial transactions without depending on banks or governments.
Data integrity is guaranteed by cryptography employing message digests and hashing methods. The receiver is ensured that the data received has not been tampered with during transmission by supplying codes and digital keys to confirm that what is received is real and from the intended sender. (4)
Although this seems like a very good idea on paper, it can lead to many fraudulent activities when not monitored properly.
How does China fit into all this?
One of the first nations to eagerly accept cryptocurrencies was China. BTC China, the country's first cryptocurrency exchange, started operating in 2011. China's largest search engine, Baidu, also started accepting Bitcoin as payment in 2013 for website security services.
Shortly after, massive bitcoin mining operations started to sprout up.
The world's center for Bitcoin mining and trading was China. The nation's administration, however, spent years trying to manage cryptocurrency's rising popularity and prevent it from undermining and displacing the country's fiat currency. As a result, the Chinese government officially outlawed cryptocurrencies not authorized by the government in September 2021.
The price of Bitcoin and Ethereum frequently falls sharply in the short term when China announces that it is outlawing cryptocurrencies. Because it poses a danger to offer an alternative to the Chinese government's top-down, centralized currency control, Beijing has absolute contempt for cryptocurrencies. The Chinese government's decision to promote its digital yuan and central bank digital money is also tied to this. (5)
China’s utter disregard for the way it handles cryptocurrencies is extremely worrying. This raises a lot of suspicion on exchanges like WazirX, which begs the question, is China targeting India through cryptocurrencies?
Although bitcoin has been completely outlawed in China, this hasn't meant that it would no longer be used there; rather, the restriction has made room for an official digital currency supported and approved by the government.
This shows that China is taking no risk with foreign cryptos like bitcoin but rather investing in their cryptos with their exchanges.
Why does the Indian government persist in withholding its judgments regarding changes involving China? Why has the Indian government not taken any action to guarantee the nation's safety from a crypto-related attack when WazirX has been shrouded in controversy and secrecy, and the global cryptocurrency market is in disarray due to China?