Potentially a game-changing digital technology, the use of crypto-currencies like
Bitcoin as a viable alternative to the national currencies like Dollar or Rupee, has
largely been seen by countries across the world –with India being no exception-
as a danger to the existing government-centralized economic system.
With contention over use of crypto-currencies as a medium of exchange, Finance
Minister Arun Jaitley, in his last budget speech, indicated no intention of it being
allowed as a ‘legal’ tender. However, there was no mention of a ban on trading or
buying digital currencies. Finance Minister pointed out “The Government does
not consider cryptocurrencies legal tender or coin and will take all measures to
eliminate use of these crypto-assets in financing illegitimate activities or as part of
the payment system.”
The tough line toed by the government was systematically followed by directives
from RBI barring banks from dealing or providing services related to crypto-
currencies. India’s premier private sector lenders like HDFC and ICICI had in fact
stopped its customers for using credit or debit cards for purchase or trading of
crypto-currencies, even before the RBI orders.
Earlier, two cryptocurrency exchanges BTCXIndia and ETHEXIndia also stopped
trading activities on apprehensions of stringent government action in future.
Many experts, however, don’t conform to the view that it is the end of road for
crypto-currencies in India. “The crypto-currencies have not been declared illegal.
It is just that as of now virtual currencies are yet to be recognized as legal
tenders” says Ajeet Khurana, head, Blockchain and Cryptocurrency Committee
(BACC) of India
Swati Garg , economist and senior academician also seconds Khurana’s views
“ The technology is extremely new, intimidating and largely misunderstood which
means it is very difficult to assign a value to it. Given the very few number
of people involved, the actions of one person too can change the fundamental
value perception of the currency. But as more and more people adapt to it, and as
laws become clearer, we do expect it to become more stable.”
Government has also set up a committee, chaired by Subhash Garg, secretary of
economic affairs in the finance ministry, which is working on rules and regulations
that would govern crypto-currencies in the country. The framework is likely to be
in place within a year. The ambiguity -surrounding the legality of virtual
currencies- till then, is expected to stay.
The decentralized model, that crypto currencies like Bitcoin offer, cuts away the
middlemen and other financial intermediaries and yet allows individuals to deal
with each other through a highly secure network based ledger called Blockchain,
automatically generating data base of every transaction in real time. So crypto-
currencies promise to mitigate the power of those financial intermediaries, which
in turn threatens the monopoly of government in monetary system and hence the
reluctance to legalize it.
Launched during the 2008 global economic crisis, by a mysterious character using
the alias Satoshi Nakamoto, Bitcoin, to its enthusiasts offers a viable alternative to
the current system as well as an opportunity to transfer power from banks and
governments to the periphery – The people.
Even though government warnings seem to have worried financial brokers, banks
and money exchanges, but the customer base, at large has adhered to crypto-
currencies. “Although post-budget announcement there have been a lot of
speculations in the market, but there has been no decrease in number of people
who exchange through our centre,” says an official of crypto-currency exchange,
Zebplay, based in Ahmedabad.
The crypto-currencies have attracted a lot of investors predominantly youth
because of its easy accessibility, lack of government, bank interference and
potential to garner humongous returns. For Qamar, a 25 year old student from
Jamia Millia Islamia University, Bitcoin is more than a mere virtual currency. “I
first tried my hand in share markets but even if I got 10% increase in my shares,
that amounted to nothing considering my small investment. Then I shifted to
Bitcoin and despite the current crisis, in the last two years, my capital has
multiplied umpteen times.” He adds “Furthermore, if you prefer not to deal
through exchanges, there are no hiccups like Aadhar or bank interference which
makes it quite hassle free.”
Having said that, what halts the prospects of crypto-currencies taking over the
central stage -in the near future- are the price fluctuations which the system
brings along. Rather than being a medium of exchange, these virtual currencies in
the present form act as speculative assets devoid of any value stability.
For instance, Bitcoin went from $1,000 at the start of 2017 to $20,000 by the
year end, but now it has slid to $8,000. “Even though crypto-currencies bring in a
sort of independence from interference of government controlled monetary
institutions but there is a lot of insecurity too. You get sleepless nights thinking
whether the prices would fall or rise and it happens within moments. Value
instability is a huge issue” says Garg.
At present, as the conflict between government -which aims at status quo- and
those who seek economic redemption through a new system cantered around
virtual currencies persists, the road for a new economic order built on the
shoulders of digital currency seems to be blocked. But the question persists,
whether India, with such unsaturated market and sample space, should give up an
opportunity to be on a central stage of such a potential game changing