As the government is planning to impose a complete ban on cryptocurrency in the country, the industry observers and experts think that the move may prove to be counterproductive.
The act of banning crypto, as witnessed in some advanced economies like China, might lead to the creation of illegitimate sources such as underground marketplaces, they fear.
About $1 million worth of crypto-currencies such as Bitcoin, Etherium and Ripple are bought and sold daily from Indian exchanges, said an ET report quoting industry firms. And more than half of these investors are believed to be in the age group of 18 to 25, it added.
According to cryptocurrency analysis firm official, Binance, which is considered the largest crypto exchange, witness over 7% traffic from India.
Experts further add that banning something decentralise is illogical move since all exchanges are mandated to follow the process laid down by the government.
Last week, the government has had inter-ministerial consultations on a draft bill to ban cryptocurrencies and regulate official digital currencies.
The govt departments including the Department of Economic Affairs (DEA), Central Board of Direct Taxes (CBDT), Central Board of Indirect Taxes and Customs (CBIC) and the Investor Education and Protection Fund Authority (IEPFA) are in favour of a complete ban on the “sale, purchase and issuance of all types of cryptocurrency”.
In 2018, the govt has constituted a panel under finance secretary Subhash Chandra Garg to draft regulations for cryptocurrencies.
Last year in April, the RBI through its circular titled ‘Prohibition on Dealing in Virtual Currencies’, asked banks, e-wallets, and payment gateway providers to withdraw support for cryptocurrency exchanges and other businesses dealing with VCs in India.
The announcement led to falling down in prices of Bitcoin, Ethereum, and Litecoin and closure of their exchanges in the country. The move also resulted in mass layoff from crypto exchanges such as Unocoin. Several crypto platforms and IAMAI opposed the move and had filed a writ petition in the Supreme Court against the RBI move.
At present, countries such as China, Russia, Ecuador and Bolivia have banned cryptocurrency, though nations such as the US, Japan, European Union and Australia have allowed their citizens crypto transactions through regulated exchanges.