The Centre’s reported plans to criminalise cryptocurrencies — 10 years in jail for holding, selling or dealing in cryptocurrencies — seem a tad excessive. If implemented, it can send wrong signals to investors, geeks, digital entrepreneurs and technologists on India’s understanding of not only cryptocurrencies but also on how we look at blockchain, the ground-breaking technology that powers cryptocurrencies. Ever since the elusive Satoshi Nakamoto introduced the complex, digitally-mineable Bitcoin, cryptocurrencies have drawn confused responses from central banks, governments and bankers. At one level, their fears are not baseless. A currency that is not based on any real economic activity, unlike a sovereign currency whose value is based on the relative value of a tradeable basket of goods and services, cannot prima facie inspire much comfort. Bitcoin’s value, astronomical even now at about $8,300 but much below January 2018’s stratospheric levels, is based on demand for a fixed supply of Bitcoins in the future — it cannot exceed 21 million in number, of which 18 million has already been mined. Cryptos are feared not just for their sheer speculative propensities, but also for their capacity to undermine sovereign currencies (the latter is an exaggerated apprehension). However, it does not make sense to go overboard and criminalise merely adventurous crypto speculators. There are no official or other data available that point towards misuse of cryptocurrencies for illegal ends.
Governments the world over have banned cryptocurrencies as a medium of exchange, and India is no exception. Yet in India, an estimated 30 lakh Bitcoins are reportedly in circulation. From a value of a little over ₹60,000 at the start of 2017, the Bitcoin now commands a value of nearly ₹6 lakh, with a global market cap of $10.2 trillion. Cryptos are recognised in the US as an asset class. Facebook will release the white paper associated with its new digital currency next week, The Wall Street Journal reports. Firms like Paypal, Uber, Visa and Mastercard have all signed up as part of the consortium to control it. Each has invested $10 million. Criminalising possession of cryptocurrencies will impact such investments. Bankers and investors now consider the cryptocurrency market at par with derivatives. The NYSE plans Bitcoin futures through a platform called Bakkt.
Underlying the crypto movement is a libertarian belief: Cryptos are an alternative asset to fiat currencies; controlled by none, they cannot be manipulated by governments with vested interests. Legalising the cryptomarket can help beneficiaries emerge from the shadows and make productive investments in an economy witnessing a digital transformation. Crypto conduct calls for regulation, but not outright criminalisation.