Cryptos should be seen as a public good

Cryptocurrencies and global regulatory bodies have had a “Will they, won’t they” from the time of bitcoin’s inception. From initial distrust and contempt from global regulators to curiosity, to a gradual, cautious acceptance, things have come a long way since 2012. In the United States, the bull run of 2017 was the watershed moment, when the Securities and Exchange Commission and the Commodity Futures Trading Commission began taking an active interest in cryptocurrencies and initial coin offerings. A little under $1 billion of that amount went into two crypto-based startups, the sheer volume of which was enough to pique the interest of regulatory bodies to delve deeper into understanding cryptocurrencies besides their underlying technology, blockchain.

Around the same time, India was just beginning to take its first steps into cryptocurrency regulation. As the bull run simmered down to the $6000-7000 range in early 2018, from $19,000 in December 2017, then Indian finance minister Arun Jaitley announced that cryptocurrencies are not legal tender, resulting in the Reserve Bank of India (RBI) passing a de facto ban on Indian banks working with cryptocurrency exchanges. Prior to the ban, there were over 2,500 users trading bitcoin daily in volumes close to $20 billion a year. After nearly a year-and-a-half of adjournments, the Supreme Court overturned the central bank’s stance and allowed exchanges to resume their businesses on March 4, 2020. Average daily cryptocurrency trading volumes across the top Indian exchanges have since grown by nearly 500 per cent.

However, the government intends to introduce a Bill in the Budget session providing for the banning of all private cryptocurrencies, besides launching its own Central Bank Digital Currency (CBDC). What needs to considered here is that globally, cryptocurrencies such as bitcoin, owing to their public nature, are considered a fully public currency. Secondly, the manner in which the industry has witnessed exponential growth in terms of adoption cannot go unnoticed. If we are to ban cryptocurrencies, the seven million-plus people who currently hold assets worth over $1 billion will be left in the lurch. Another case in point — Elon Musk’s $1.5 billion investment in bitcoin last week is testimony to the potential of the digital asset. In this context, a probable ban would also repel a trillion dollars in crypto capital from coming to India. 

According to the International Monetary Fund, “cryptocurrency could completely change the way we sell, buy, save, invest and pay our bills”, and could be “the next step in the evolution of money.” Owing to their decentralised nature, cryptocurrencies can potentially strengthen India’s monetary system. India is the world’s top recipient of remittances, receiving about $80 billion annually. Crypto can channel large flows of money across borders seamlessly. 

However, the RBI’s intent to explore CBDC is positive for the industry, given that the United Kingdom, Canada, Japan, Singapore and Hong Kong are already at advanced levels of designing such systems, while also exploring use-cases such as cross-border payments. 

Irrespective of which route the government takes, we would like to reiterate that we are, as always, ready to hold a dialogue with the government to help further the cause of regulating cryptocurrencies and blockchain technology. Every disruptive industry needs time to scale up, and regulations in parallel will offer the right patronage. Public blockchains like bitcoin and Ethereum can prove to be the financial building blocks of tomorrow. Recognising them will help India with new job opportunities and accelerated GDP growth. In the wake of developed economies embracing cryptocurrencies, resistance from regulators will result in India losing out in the global technological race. 

The writer is co-founder and CEO of CoinDCX. This column has been edited for space.