To protect the easily exploitable consumers our Govt. banned Tiktok. Now it seems to be the turn of cryptocurrencies. Arguments are being made by people in defence of crypto currency ban. But as things are not yet quite clear in the bill. We are left with speculations and arguments. Just banning cryptocurrency doesn't seems to be a viable solution.
One argument is that there are just too many cryptocurrencies, but in order to become money (As a medium of exchange) uniformity is a necessity. Yes, this is true however in long run this argument is irrelevant because we know, Monopoly is the end of competition. Mr. Raghuram Rajan said "Out of 6000 odd cryptocurrencies only one or two best will survive." Here we can learn from history that even in barter system, initially, there was lot of competition but in long run gold and silver came out as clear winners. we won't be wrong predicting the same for cryptocurrencies.
Another argument made is that the average investor in India is 24 years old, first time investor who is being lured by false higher rewards shown in the advertisements of crypto trading companies. As a natural consequence of this, Indian investors loose money, the lost money then goes out of India and reduces our currency reserves. Well, we all know at least one person who falls under this category. Unfortunately, there are (lot of) people in India who are an easy prey for crypto currency propaganda.(Advertisement) This is a chief argument made for crypto ban. But if we move our heads a bit we can see a similar phenomenon happening. The same 24 year old ignorant guy who is putting his money in cryptocurrency without understanding how it works is also investing in stock market without being able to even read a balance sheet. If cryptocurrency is being banned because average Indian investor is ignorant and easily exploitable then by this logic stock market should also be banned. Here i guess ban is not a viable solution to protect the ignorant and easily exploitable masses but our government must take stand to educate our investors so that they are able to make rational decisions. As the saying goes "Dear God don't give us easy circumstances but make us strong enough so that we can conquer even the tough ones."
argument that banning foreign crypto giants will help our Indian home grown cryptos. Yes, it will help our 'Made in India' cryptos, but for how long? lets imagine its 2040 and we have been successful at keeping foreign cryptocurrencies at bay. As we already know by that time there will be only one or two cryptocurrencies which will have a substantial global share in being used as a medium of exchange. At that point India will encounter two major problems: first, Indians won't be able make international payments as in 2040 Indians won't have reserves of the internationally standardized cryptocurrencies because they are banned in India. Secondly, if India at that point decides to open its markets for foreign cryptocurrencies, it will most probably disrupt the then established crypto market. If markets are opened in 2040 Indians may give higher preference to the currencies which are by then were able to establish themselves as international standard. As a result Indian crypto companies will suffer the most. In this way the time taken to open boarders for cryptocurrencies will be directly proportional to its consequences on Indians and Indian crypto currencies.
Now comes the argument that because of the secure nature of cryptocurrencies it may be used by terrorists. As lot has already been said by others to counter this argument, i will try to protect myself from repeating them. But i would still say that evil or good nature of any technology strictly depends on the hands who use them. A knife can be used to cut an apple or cut a throat. Then ban knife too? If we ban all the technology which can be used by evil hands then wouldn't India go back to stone age? (Even stones can also be used to harm others, ban them too?)
Our respected experts at RBI have done their research and they have come up with a plan to regulate the cryptocurrency market. But until we see this bill in execution we won't be able to see its real implications. Most of the arguments which are given seems to be unprepared excuses which hides the fact that the predominant reason for the ban is to keep in control the supply of medium of exchange in the country. Least we can do is to hope for the regulations to be liberal enough to prevent the unnecessary losses.