The RBI’s ban on banks using cryptocurrency has been the talk of the nation over the past couple of months and the delay in Supreme Court’s verdict has added to the curiosity. With the verdict expected real soon, let’s take a look at how industry players have been affected and what the future holds for them.
What went wrong?
To start with, the government’s outlook towards the cryptocurrency industry right from the beginning was not encouraging. Without adequate research or a proper understanding of this relatively nascent fintech phenomenon and its impact on the economy, a false alarm was raised against it quoting security, fraud, and money laundering reasons. Though the government’s concern for the citizens is plausible, the rather callous attitude towards stringing together proper regulations, drafting Anti Money Laundering (AML) laws, educating both the financial institutions and citizens, that has been displayed by the government is definitely not. Various financial and regulatory institutions in the country have incessantly been talking about putting together regulations and guidelines but no significant action has been taken till date. These factors have cumulatively crippled the cryptocurrency industry in the country
RBI intervention makes it tougher for crypto exchanges:
RBI dealt its first blow by directing major banks to bring to a halt all activities related to cryptocurrency institutions, thereby forcing crypto exchanges to tie up with smaller banks after all the major banks suspended their accounts. While the exchanges were figuring out a way to perform transactions with smaller banks, RBI’s blanket ban on the banks brought crypto trading to a complete halt. Though the decision has been contested in the Supreme Court, the hearing has been deferred continuously owing to delay of prior cases and the verdict seems to be taking longer than expected.
Impact on the cryptocurrency industry:
The crypto exchanges have started facing the heat due to the delay and are thinking about suspending operations in the country. The environment has become very hostile for the companies to survive and operate. Zebpay, one of the country’s largest cryptocurrency exchange has shut down its operations in the country. Industry experts fear this could be a starting for what could be a long list of companies that shut down operations in the country.
Several companies have also started looking for options in other geographies. Companies in China faced a similar scenario when the Chinese government clamped down on the crypto exchanges leaving the crypto exchanges with no choice but to flee the country.
As called out earlier, the government must look to draft regulations and laws. Countries like South Korea, Australia, United States, Singapore, Malta and Japan have shown extreme caution in handling blockchain technology without compromising on the security regulations making them maximize the benefits of blockchain and cryptocurrencies. Investors are looking for options to generate revenue and the above-mentioned countries offer a great option for these investors.
Failing to act swiftly in resolving the uncertainties and putting together well-defined regulations and laws will result in investors and exchanges bidding goodbye to the market. An entire generation will miss out on the benefits of the futuristic technology that will be reaped by other nations. Reviving the market will become extremely difficult and newbies will be extremely tentative to invest owing to the history of events that caused the market to dip.
To summarize, blockchain and cryptocurrency go hand in hand and the Indian government and financial institutions must act swiftly and sensibly to avoid what could be one of the biggest mistakes of the modern age.