Is the Crypto Party over in India?

Crypto Bloodbath

There seems to be a lot of bad news for crypto-currencies from across the world. This has resulted in huge downward corrections of crypto prices in January. The bloodbath may not yet be over and both crypto investors and traders are trying to figure out what course the market will take.

Not the real problem

I am personally not so much bothered about where crypto price is headed in the short run. I am more concerned about how governments across the world will respond to this crypto explosion which really started in 2017 with the launch of so many altcoins and the mother of all rallies in crypto prices lead by Bitcoin.

Government action can become the real roadblock

I have had some conversations on this here and there on Steemit and most people are of the opinion that cryptos cannot be stopped and if one country bans or blocks them, some other country will embrace them. A large section of crypto-enthusiasts is of the opinion that the distributed nature of the technology will ensure that it cannot be banned at all. John McAfee is a huge proponent of this thought process.

Torrents were stopped from spreading… Will crypto meet the same fate?

I am no John McAfee, neither am I an expert in blockchain technology but I sure know what negative regulations and hard-hitting government response can do. Take the example of torrents. While it is not blockchain, it also works in a very distributed way. Governments across the world had a real hard time controlling piracy in the torrent networks. While they have really not been able to completely stop pirated downloads over torrents, they sure have closed down the majority of the popular torrent websites, arrested many people and outlawed them in such a way that all pirated downloads are liable for legal action. Don't people download stuff now? Sure they do, but they break the law by doing so and can very well land in jail.

Comparing blockchain to piracy may incite sharp reactions from Steemians but governments really look at blockchain through the same lenses. They look at a possible future where fiat currencies lose out to cryptocurrencies as a medium of exchange and governments lose the ability to tax crypto income and transactions. Bitcoin's initial tryst with narcotics and other illicit trade is a case in point and no government will like it. Top it off with the possible use of crypto-funds to fund terrorism.

How can they kill crypto?

I think the easiest way to kill cryptocurrencies is really not so hard if the governments decide to take a step towards that end. All they need to do is outlaw crypto transactions, shut down exchanges and stop conversion to fiat. No matter how big the virtual economy is, any coin no matter how valuable it may be will mean nothing if it cannot buy anything in the real world if it cannot be converted to fiat and withdrawn into a bank account - this is true at least in the short to medium term. The dream of a completely tokenized world is still some distance away and on today's date value of any coin is still measured in USD.

Coming to India

The Reserve Bank of India and the Finance Ministry of the Government of India have given multiple statements making it clear that cryptos enjoy no legal protection in India and that they are not legal tender to be used to transact. They have gone so far as to call cryptocurrencies as Ponzi schemes and only today the finance minister stated in his annual budget speech that the government will take action to curb the use of cryptocurrencies. The government is obviously wrong in their understanding of blockchain and cryptocurrencies, but what has ever stopped a government from banning something even when they were wrong? They do not fear losing votes as the crypto community is still very small.

Concluding thoughts

As a new crypto-enthusiast from India, these developments are disheartening me and making me skeptical about putting in money to buy Steem or any other coin as it is so easy for the government to ban the exchanges or freeze their bank accounts as these exchanges do not enjoy much regulatory protection as of now.

This is why I am skeptical of the future of cryptocurrencies in India at least in the short run. In the long run, the government may come to realize it's mistake and withdraw restrictions but the opportunity cost may be huge for India and Indians.

I sincerely hope it doesn't come to that.