Why India needs bitcoin and other cryptocurrencies?

In the last fortnight, Bitcoin and cryptocurrencies have taken the world by a storm. The currency has hit $22,000 in value and is being compared to gold. Renowned investor, Chris Wood, announced that he would be making investments in Bitcoin, whereas some media reports indicated that the value of the world’s first cryptocurrency might hit $400,000!

The wariness exhibited by governments has also paved the way for adoption. S&P Dow Jones Indices last month announced that it would launch cryptocurrency indices in association with virtual currency data solution company Lukka in 2021. Lukka will provide data on the basket of currencies to be traded on the platform. Earlier, Australia had announced an integration of its stock market with blockchain. Meanwhile, crypto-exchanges have been becoming popular across the world.

On the other hand, the initial enthusiasm with regards to cryptocurrencies in India has now led to scepticism. RBI tried to strangulate the system by disallowing banks and payment entities to deal with cryptocurrency exchanges. While the SC kept aside the RBI order this year, now there are talks that the government may be moving ahead with a ban. There have been flip-flops from the government as well. A committee set up by the government wanted to regulate cryptocurrencies; however, even the Parliamentarians are now veering towards a ban on cryptocurrencies. Meanwhile, the government is trying to promote the technology behind the currency—blockchain.

Trends show that blockchain development and cryptocurrency often go hand in hand. China, which has allowed cryptocurrency exchanges to flourish, is also the home of the largest number of blockchain start-ups. Besides, if the government has digital tools to confirm identity, then it makes little sense to ban their trade.

Moreover, the future of gaming also depends on these virtual coins. Although gaming in India is still at a nascent stage, it is developing fast, and people are spending more on gaming than they ever did. The growth of the industry is predicated on the development of an ecosystem, which shall be incomplete without a payment mechanism.
Two, the government needs to be aware of cryptocurrency monopoly. By banning, and not regulating the service, the government is giving a free hand to the big companies to develop their assets, Once the market is open—a ban can’t be sustained forever—the government would have little control on the market.

If Facebook is able to get Libra off the ground, then given the sway it holds and its war chest, it would be too late to take any action or roll back the tide. The government has a chance to be a partner in crypto development. Unless it understands how the market works, it won’t suddenly be able to assume the role of a regulator.

ishaan.gera@expressindia.com