The Indian finance ministry is still shrouded by ‘indecision’ with regards to cryptocurrency. It is well known that a section of the cabinet stands strong against crypto-trading in the country. However, the progressively growing population of crypto-enthusiasts is leaving no stones unturned to persuade the government to allow cryptocurrency as an asset class for Indians.
The blocking of cryptocurrency could spell disaster for the economy, and this is getting echoed from various corners. Maintaining Cryptocurrency reserves are as important as maintaining dollar reserves. By banning crypto, India will end up with the lowest reserve of the most important currency the world has ever seen. This would eventually lead to a currency devaluation of the worst form
Indian economy for its sheer market size and large educated workforce would have flourished with a space for crypto activity if not for the short-sightedness of the regulators who would rather snuff out this great potential. This would cause veritable damage to the small businesses that generate the bulk of GDP and employment.
Currency Devaluation entails a string of setbacks that will inevitably distress the economy:
- Imports would be more expensive (any imported good or raw material will come at a much higher price)
- Aggregate Demand (AD) would increase – causing demand-pull inflation.
- Firms/exporters would have less incentive to cut costs because they can rely on the devaluation to improve competitiveness.
A crypto ban under these conditions would reset the economy to its primeval phase.
There are strong doubts around the release of India’s own digital currency, as some dismiss the idea as an intentional diversion. Questions are also raised on the utterance of ‘cryptocurrency’ and the underlying blockchain technology in the same breath.
As HashCash chief, Raj Chowdhury points out, “These are two distinct and diverse threads that may be accepted independent of each other. While Blockchain is a technology, Cryptocurrency is an asset class. It should not be difficult to implement the two in their respective domains.” adds the blockchain pioneer, author, and keynote speaker.
Despite voicing assurance regarding the acceptance of cryptocurrency as an asset class in India, the balance seems tilted towards a probable ban. The Finance Minister has pronounced on more than one occasion that the center would take a ‘calibrated’ stance on the prospects of crypto. In very specific terms she emphasized allowing a small window for possible experimentations with cryptocurrencies.
“What India needs is acceptance of crypto with taxation and regulations imposed, that will earn revenue and benefit the huge number of investors and Indian startup companies who have gone global within a short period,” says Chowdhury, “ rather than depriving the people of their choice of investment by adopting a naive approach towards the crypto”
As republic governance of the largest economy with a sound technological footing, it is expected to make decisions that would benefit the entire technological and financial sectors. This, especially when the prospects are revving globally and to not be a part of the revolution would inevitably push the economy towards regression.