Make hay when the sun shines. With the value of bitcoin over $60,000, the government is likely to provide an exit window to holders of cryptocurrencies before banning them, according to reports.
The government may allow a three to six months period for investors to sell their holdings before banning cryptocurrencies, according to reports.
Cryptocurrency ban
The government plans to soon introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the parliament.
The bill, one of the world’s strictest policies against cryptocurrencies, would criminalise possession, issuance, mining, trading and transferring crypto-assets.
The measure is in line with a January government agenda that called for banning private virtual currencies such as bitcoin while building a framework for an official digital currency. The bill would give holders of cryptocurrencies up to six months to liquidate, after which penalties will be levied.
If the ban becomes law, India would be the first major economy to make holding cryptocurrency illegal. Even China, which has banned mining and trading, does not penalise possession.
Can cryptocurrencies be banned in their entirety?
Experts say banning cryptocurrencies is difficult as they are in digital form on the internet and the government cannot really stop users.
Transferring cryptocurrencies from one user to another can be as easy as sharing pirated movies on a pen drive as they are held in digital wallets. Also cracking down on crypto exchanges may drive holders to underground markets and take their money overseas. Another drawback is it would make it more difficult and costly to develop new block-chain based products.
2018 experience
Even when the RBI briefly banned banks from dealing in crypto in 2018, exchanges such as Zebpay saw an increase in deposits. Even as the platform rushed to return everyone’s rupees before the banks cut their services, investors offered up more money to invest in cryptocurrencies. The banking ban on crypto didn’t cause many to give up on the asset class. Instead, they simply moved to peer-to-peer (P2P) crypto platforms such as WazirX. since P2P was for a while the only way for Indians to buy or sell crypto after the banking ban, it helped WazirX grow rapidly.
Those who continue to trade in crypto either aren’t too concerned about negative regulation or may have figured out some safeguards.
Rising volumes
In India, despite government threats of a ban, transaction volumes are swelling and 8 million investors now hold Rs 10000 crore in crypto-investments, according to industry estimates.
User registrations and money inflows at local crypto-exchange Bitbns are up 30-fold from a year ago added 20,000 users in January and February, despite worries of a ban.
ZebPay “did as much volume per day in February 2021 as it did in all of February 2020.
WazirX, another Indian cryptocurrency exchange, saw its trading volume shoot up from $635 million in December to $1.6 billion on March 21. The uncertainty has brought volatility in the Indian market and that most people are buying cryptocurrencies when prices dip briefly.
Inefficiencies of pricing are more exposed during volatile times, inviting a new wave of trades to take advantage of this situation and thereby increasing total trading volume.
