The RBI Reserve Bank of India has requested that cryptocurrencies be banned in India, according to a statement made by the Indian Finance Minister in parliament. Is crypto banning in India? Is there a government plan to outlaw cryptocurrency in India? The Indian cryptocurrency industry was negatively impacted by this finance minister’s statement. Since cryptocurrency has been declining for the past eight months, it had some impact on it as well. As a result, new investors are curious about whether a cryptocurrency will be outlawed in India. They are once more perplexed as to what RBI actually desires and what will take place next. Is crypto banning in India due to some recent reports regarding the Indian cryptocurrency market, investors are now even more confused.
What does the government want?
Since the news was not significant, only straightforward questions were raised in Parliament. Does RBI know about this or not? How does RBI post notifications? What has RBI done? What is RBI take? Thus, the Indian parliament was asked these questions. The finance minister’s response that RBI wants cryptocurrency banned in India was therefore the highlighted response.
She asserted that cryptocurrencies pose a threat to the stability of the financial system. She said that allowing cryptocurrency could cause a nation’s financial system to collapse and have an impact on monetary policy. Therefore, the media focused on the fact that the RBI wants to ban cryptocurrency in India and is already doing so. Is crypto banning in India? Since day one, RBI has been very clear that they want to outlaw cryptocurrency.
India banned all banking entities from dealing with the crypto ecosystem on April 6, 2018. He, therefore, brought up this in 2018 after the case was dismissed. The Indian cryptocurrency industry should receive services from banking entities, the Supreme Court of India ruled on March 4, 2020.
It’s true that no bank has properly served the Indian cryptocurrency industry up until this point. Every exchange, as you are aware, is battling with bank regulations as well as those relating to cryptocurrencies. Therefore, the RBI’s desire for a crypto ban is nothing new, but it’s interesting to note that the finance minister also stated that a ban is only possible or can be effective with international coordination. Thus, when the RBI requested a crypto ban, the finance minister responded, “Okay, we’ll do it, but if the rest of the world would support this, then we’ll ban it because that’s important.”
Can the RBI’s demand be approved by the Indian government?
Is crypto banning in India? I believe that any government could impose a ban on cryptocurrency; all they would need to do is pass a law in the legislature. But everyone seems to understand that it can no longer be forbidden. Why? Because it uses the internet as its medium of exchange and cannot be completely closed on the ground. Even people can deal with it using cash in the same way that they can buy and sell it using the peer-to-peer model. At least now, they can track information about who, when, and how is buying or selling cryptocurrency through exchanges. The majority of people use exchanges; 95% of the cryptocurrency community works with them.
Related: What is cryptocurrency?
Why is RBI afraid of cryptocurrency?
I think RBI shouldn’t be concerned about cryptocurrencies. If you make bitcoin or other cryptocurrencies legal tender or accept them as a form of payment, RBI should be afraid. If bitcoin is accepted as a payment method, then everyone will begin buying and selling it. After that, everyone can switch from INR to BTC. People will start switching from INR to bitcoin, which may have an impact on the monitoring policy. Because in that scenario, bitcoin will become more trusted in comparison to INR, posing a serious threat to monetary policy. Therefore, in my opinion, you don’t allow it as a payment method or legal tender in your country. Since other nations are currently doing the same, you can treat it as an asset or a commodity.
According to RBI, when cryptocurrency is legalized in India, people will begin trading it. The majority of cryptocurrency pairs when people start trading are with USDT. Therefore, people will hold USDT when they sell their Bitcoin, and they will need USDT to buy Bitcoin. Since demand for USDT will increase as a result, USDT is backed by the dollar. People will begin moving their money from banks, shares, ventures, and mutual funds to USDT once they hold a significant amount of it.
Thus, all of this cash will be invested in USDT and USDC. Therefore, the dollar will become stronger when demand for USDT and USDC increases. Because people will start switching their money from INR to USD when demand rises and supply falls, this will have an impact on their liquidity. Because people won’t invest their money in mutual funds and savings accounts. Liquidity will then shift to USDC and USDT. I believe this is the reason RBI is concerned; after all, the banking system’s lifeblood is liquidity, and if they lose it, their banks could even collapse, endangering their ability to pursue the sound monetary policy. The Indian crypto community is in a mess as a result, and they are asking about is crypto banning in india.
Do we have any examples of countries that permit cryptocurrency and then experience financial collapse?
I believe that nobody has fully regulated it up until this point. Take El Salvador as an example, where they declare their currency to be legal tender. El Salvador is a tiny nation; it cannot be compared to any large nation, such as India or the USA. They don’t yet have their currency in EI Salvador. Most people are unaware of it. There is no monitoring policy anywhere in the world where there is no central bank influence. When a country’s currency has no value, it adopts the US dollar as its unit of account. Therefore, even today, the US dollar is accepted as a legal tender in many nations that lack their own national currencies, central banks, and regulatory policies. El Salvador accepted the US dollar as a legal tender. Therefore, El Salvador has decided to accept bitcoin along with the US dollar as legal tender.
Do they realize why they are doing that?
They claim that if anything goes wrong in the USA, such as when they print more money or something similar, it will have an effect on all other nations that accept the US dollar as legal tender. In essence, they made bitcoin legal tender at that time. Many nations intend to follow suit, primarily due to the lack of national currencies in many nations. Decide today whether you want to compare it to China or India.
I believe it was impossible at the time. You cannot compare El Salvador with a large economy because it is a small nation. There is currently no example where you can say that a nation has legalized the entire crypto ecosystem or that it accepts bitcoin as a form of payment. Every nation has a changing face. No nation possesses an appropriate regulatory framework. You witness new advancements and developments every day.
As an illustration, let’s use the United States of America. What constitutes securities and what qualifies as commodities is up for debate in America. In America, some people believe that cryptocurrency should be divided into two phases: a commodity phase and a security phase. Commodities include things like gold, silver, copper, etc. These resources are typically natural commodities. Everyone now agrees that bitcoin is a commodity and that anything else is security. You can comprehend securities by thinking of a person who solicits donations by saying, “Give me money, and I’ll give you a stake or equity.” Whether it comes in the form of shares or tokens, I will put in a lot of effort to see my business succeed. In return for your trust, you will receive the dividend, so you can do so.
The best illustration of securities is this. Security is anything that includes a promise or a way of raising money that implies an investor should put their trust in you and give you their money in exchange for benefits. Everyone is willing to accept bitcoin as a commodity because there is no such thing as a promise, fundraising, founder, or commitment in a bitcoin. In America, there are basically two departments: a department for securities and a department for commodity features trading commissions. SEC regulates shares, while CFBC handles commodities. These two divisions deal with both commodities and securities in India and are part of the security exchange board of India. Therefore, if America becomes fully regulated, other nations can learn from it.
Is there a way for India to use the INR pair while maintaining INR liquidity?
If you look at exchanges in India, you can already buy INR. Therefore, you can close the USDT pair if this is a problem. The liquidity of the INR pair will consequently rise, and exchanges’ confidence will rise. Because, like banks, your exchanges are governed by the government. For every issue, a solution is already available. Exchanges that only deal in INR and cannot conduct transactions in USDT or USDC may be granted licenses. Additionally, the government can develop its own stablecoin through the CBDC. Thus, you can purchase through CBDC.
Do these remarks have an impact on the crypto industry in India?
Everyone wonders is crypto banning in India because it generates negative feelings for the Indian crypto community. The Indian cryptocurrency market is already going through worse times, like a 30% tax, rejection from VCs, and exchanges losing their funding. Additionally, there is no trading volume, which is bad for the industry. This leads to more chaos and the spread of unfavorable attitudes within the Indian cryptocurrency community.