The Reserve Bank of India (RBI) entered uncharted waters by dealing a ban on cryptocurrencies which has caused outrage and confusion among the crypto investment community in India. This ban applies to all transactions related to cryptocurrencies such as Bitcoin and the embargo effects the transfer of money form designated bank accounts to cryptocurrency wallets.
This is a bold move from the RBI and could signal India’s stance on cryptocurrency or could mean something bigger within the industry as this ban could potentially put many companies based in India out of business.
“We have decided to ring-fence the RBI regulated entities from the risk of dealing with entities associated with virtual currencies. They are required to stop having a business relationship with the entities dealing with virtual currencies forthwith and unwind the existing relationship within a period of three months,” stated RBI deputy director BP Kanungo.
In comparison to the world stage, India is not a big player in the cryptocurrency market but the usage of cryptocurrency-based revenue from raising capital based on the trading of digital currencies has lead the way for new and innovative companies to become operational. These businesses stand to offer a collection of desperately needed services and products which could spell disaster for the economy in the future. The bad news for Indian economics doesn’t stop there because this ban also pertains to the amount of incredibly talented blockchain developers and other crypto-talented people who will now have to peruse opportunities elsewhere in the world.
While India is not a huge market for Bitcoin from a global perspective, development of blockchain related products and services has been growing and launching a number of innovative companies offering real solutions in a country that desperately needs them. This ban not only threatens the survival of these companies but also has the potential to lead to a massive drain of talent as blockchain developers follow opportunity elsewhere.
What is the Solution for India?
To understand the decision for the ban, we must understand the issues surrounding cryptocurrency in India and understand the rationale for the country’s apprehension. There is still an opportunity for India to embrace cryptocurrency but not before addressing the risks and criminal behavior that has been plaguing the crypto market in India
According to Experian, identity theft is the largest contributor to fraud in India. Globally, it’s a $200 billion dollar problem every year. In India, a whopping 48% of online users are hit by fraud. This can be combated through software solutions such as Velix.ID, a company which has built a decentralized solution for frictionless identify sharing. The solution stores identify data on a public ledger in an anonymous manner with no authority having singular control over this information.
The banking industry in India has experienced setbacks in recent years and that has left the institute in shambles. The first major issue was the issue of NPAs, followed by demonetization and now finally with the recapitalization of banks. All of these changes have had a huge impact on the industry but there is a potential blockchain solution which can help to repair the damage and balance the industry again. The solution lies with a company called Primechain Technologies. Founded in 2016, Primechain is developing blockchain-based solutions for the Indian banking system, including a blockchain powered technology platform for authentication, verification and data storage.
Finally, there is a startling statistic outlining a spike in property related civil suits and currently, these cases account for 66% of civil legal proceedings in India. There is a blockchain solution to address this as well. In 2016, FinTech Valley Vizag was launched in the southeastern state of Andhra Pradesh. Vizag has attracted $900 million in investment and responsible for the creation of over 5,000 jobs. Andhra Pradesh has become the first state in India to adopt blockchain for governance.
It is Not All Bad News, However….
India has taken a strong stance on cryptocurrency but in the same breath, made a declaration to develop and support a state-owned version of cryptocurrency which might have everything to do with the recently imposed ban. It appears that India is not completely against the commercial benefits of cryptocurrency, the nation just wants to make sure they can capitalize on the potential benefits of the market and implement their own version for the security and protection of the people in India. Only time will tell and there is still life left in the Indian cryptocurrency market.
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