Bitcoin Ban Could Cause Crypto Firms to Go Abroad and Investors to Do Business on Overseas Exchanges: Expert

The likely upcoming ban on Bitcoin and other cryptocurrencies by the government could lead to an exodus of crypto startups from India to favorable ecosystems around the world, according to Ajeet Khurana, a prominent cryptocurrency expert, along with millions of Indian investors who could start participating trade on international stock exchanges. Khurana was previously Chair of the Blockchain and Cryptocurrency Committee of the Internet and Mobile Association of India (IAMAI) and former CEO of cryptocurrency exchange ZebPay. “The foreign stock exchanges will not bother about the ban. Finally, many Indian crypto companies could relocate abroad due to the ban. Furthermore, investors living in small towns and having invested say Rs 5,000 or Rs 10,000 will all start trading on international exchanges even if the government cannot reach them individually. So the move will effectively take millions of dollars in crypto transaction volume and give it away to international exchanges,” Khurana, currently Venture Partner and Global Expert at Blockchain Founders Fund, told Financial Express Online in an interaction. Based in Singapore, the fund invests in companies involved in blockchain technology.

According to a January Lok Sabha bulletin for the budget session, the government is expected to introduce a Cryptocurrency and Official Digital Currency Regulation Act soon, 2021, to ban all “private cryptocurrencies” in the country like bitcoin, except “certainly.” . Exceptions to promote underlying cryptocurrency technology and uses,” the legislation had read. However, the bill aimed to “provide a facilitating framework for the creation of the official digital currency to be issued by the Reserve Bank of India.” However, Finance Minister Nirmala Sitharaman earlier this month had said in a conversation with CNBC TV18 that the government wanted to make sure there was a window for all kinds of experiments that needed to take place in the crypto world.

However, the Reserve Bank of India had continued to take a tough stance on the use and adoption of cryptocurrencies in the country. Back in 2013 and 2017, Apex Bank had warned users about potential financial, operational, legal, customer protection, and security-related risks of virtual currencies. By April 2018, it had effectively banned cryptos. The RBI had requested all regulated entities to stop trading virtual currencies or offering services such as registration, trading, settlement, clearing, lending against virtual tokens, acceptance as collateral, opening accounts with exchanges that trade them, etc overturned by the Supreme Court in March last year, although here the RBI argued that the use of cryptos would fundamentally undermine India’s credit system and currency stability. Also in an interview with CNBC TV18 in February 2021, RBI Governor Shakktanta Das had said that the central bank had “major concerns” about crypto-related risks to financial stability.

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“RBI’s statement should be taken seriously. Against this background, the government may be forced to take prohibitive measures. What can the government do because this is a problem for them. I hope the government understood that there is a difference between cryptos and crypto investors and service providers. It can’t ban cryptos, it’s impossible. You can still ban the internet, but not crypto. At best, you can ban crypto companies like exchanges,” Khurana said.

In a written response to a question in the Rajya Sabha on Tuesday, Treasury Minister of State Anurag Singh Thakur had said that the government would make a decision on the Interministerial Committee (IMC) recommendations on cryptocurrencies in India. Accordingly, any legislative proposal would be submitted to Parliament. Importantly, the IMC, headed by the former secretary of the economics department, had proposed action on cryptocurrencies back in February 2019. “However, Garg had said last year that cryptos should be regulated as an asset class. It is interesting that the author of the report himself calls for regulation,” Khurana said.

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