The Impact of India’s Cryptocurrency Ban on the Diaspora Community.
In recent years, cryptocurrency has emerged as a popular and innovative form of currency that has revolutionized the way people make transactions. However, the Indian government’s recent decision to ban cryptocurrency trading has caused much concern and speculation about the future of this digital currency in India. This ban has not only affected the Indian economy, but also the diaspora community who are spread across the world.
India has one of the largest diaspora communities in the world, with over 30 million people living in different parts of the globe. The Indian diaspora has always been an important contributor to the Indian economy, with their remittances accounting for a significant portion of the country’s GDP. However, the ban on cryptocurrency has put a spanner in the works for this community.
The Indian government’s decision to ban cryptocurrency trading has left many members of the diaspora community in a precarious position. Many of these individuals rely on cryptocurrency for making cross-border transactions, which are often faster and cheaper than traditional banking methods. The ban has made it difficult for these individuals to access their funds and has disrupted their ability to conduct business.
The impact of the cryptocurrency ban on the Indian diaspora community is not limited to those living abroad. The ban has also affected those who are still living in India, as many individuals have invested in cryptocurrency as a means of securing their future. The ban has left these individuals with a sense of uncertainty and has forced them to consider alternative investments.
In addition to the economic impact, the ban on cryptocurrency has also had a psychological impact on the Indian diaspora community. Many members of this community see the ban as a signal that the Indian government is not supportive of innovation and entrepreneurship. This sentiment has the potential to discourage members of the community from investing in India and may push them towards other countries that are more supportive of cryptocurrency and other forms of innovation.
While the ban on cryptocurrency has caused significant disruption, it is important to note that the Indian government’s decision was not without reason. The government has cited concerns about the potential misuse of cryptocurrency for illegal activities such as money laundering and terrorist financing. The government has also expressed concern about the volatility of cryptocurrency, which can lead to significant losses for investors.
What is Cryptocurrency?
Cryptocurrency is a digital form of currency that uses encryption techniques to regulate the creation and transfer of units. It operates independently from the central banks or other Financial Institutions and allows the users to interact with each other directly and securely. Cryptocurrencies are volatile and some people might view them skeptically because of it but it can offer tremendous opportunities for businesses to increase profits and reduce costs.
One of the main features of cryptocurrency is that it works with unblocks and technology. This technology has revolutionised the way you think about data storage, transaction management, and security. It is decentralised and offers unparalleled immutability and transparency. It has a great impact on banking finance, healthcare supply chain, and other industries. By using innovative Cryptography techniques and smart contracts blocks and technology provides a secure platform for carrying out digital transactions of cryptocurrencies and NFTs. It is secure, safe, and authentic.
How Can Cryptocurrency Be A Problem For The Government?
Cryptocurrencies might have multiple advantages over any other form of physical currency or digital assets but there are certain important factors that the government has to keep in mind before working on the legal status of cryptocurrency.
Non-Traceable
The transfer of cryptocurrency does not require any middleman or third party or authority. The transaction can be done easily but once a transaction is done it cannot be reversed or tracked. This way cryptocurrencies can be used for conducting some sort of illegal transactions that include tax evasion and hiding of assets. This makes it a challenge for the government to ensure that cryptocurrency is not used for any illegal purposes in the nation.
Decentralised Nature
The decentralised nature of cryptocurrencies makes them free from any sort of government or financial authorities. The unregulated transactions of cryptocurrencies can make it difficult for the government to keep track of them. Decentralisation of cryptocurrencies also means that if any party involved in a transaction of cryptocurrency faces any issues there is no authority that they can go to for a solution to the problem.
Volatile in Nature
Cryptocurrencies are digital assets and their value varies. The prices are highly volatile and they can fluctuate within a very short period of time. If people decide to invest in cryptocurrencies and the prices fluctuate widely this can affect the economy of the nation and this is something that the financial authorities of the country have to look into.
Scams
Cryptocurrency has been around for quite some time but it has gained popularity in the last few years which means that people are not yet aware of its security systems and features. This gives hackers and scammers an opportunity. There have been multiple frauds and scams and a lot of traders and investors have faced a loss of money because of it.These are some of the reasons why the government is still thinking about the legal status of cryptocurrency in India and how they can regulate its working.
Legal Position of Cryptocurrency in India
A legal tender is a medium for exchange used to settle transactions. When a currency is under legal tender status it allows the currency to be used to settle debts. The currencies with legal tender status are backed by the government and are accepted by the government.
When we talk about cryptocurrencies, we know that in India traders virtually transfer cryptocurrencies and use them for transactions and Investments but it does not have a legal tender status. This means that Bitcoin and other cryptocurrencies can not be used to settle debts in exchange for any type of goods or services.
Cryptocurrency is taxed under the category of virtual digital assets. The Indian government knows that virtual digital assets are a part of the international and Indian economy. They cannot be banned but a tax of 30% is charged on cryptocurrencies in India as announced in the union budget 2022. But the taxation of cryptocurrency does not make them completely legal and they still do not have any set of rules about their working. People trading with cryptocurrencies are still waiting for the government to look into this matter and release a bill that has all the rules regarding the transactions and mining of cryptocurrencies in India.
Legal Status of Cryptocurrency in Other Countries
Cryptocurrencies and digital assets are not only new in India but also in other countries as well. Different countries have different sets of rules regarding them while some countries are still trying to figure out how they work and how to regulate them.
Around 131 countries including the United States Of America, the United Kingdom, and other European countries have legalised the status of cryptocurrencies for investment. However, these countries are yet to release a comprehensive set of rules regarding trading. Only two countries have given the status of legal tender to cryptocurrency.
Trading and transactions of cryptography are legal in multiple countries but these cryptocurrencies are restricted from banking uses. Some countries including China, Nepal, and Egypt have completely banned the use and transactions of cryptocurrencies. This includes trading, holding, and investing in these digital assets.
How Realistic Is A Crypto Ban?
In 2020, in the IAMAI vs. RBI case, the Supreme Court stayed the central bank’s order prohibiting banks from providing support to entities or persons dealing with cryptocurrency.
The court set aside the circular on the ground of “proportionality” but did not question RBI’s power to issue such a circular.
The court found that RBI’s action was disproportionate as the virtual currencies were not banned in the country, and it could not prove any damage possible to the banks due to cryptos.
The apex court order does not restrict RBI from passing new rules. The government can ban cryptos through a new law, but such rules can only be challenged for violation of fundamental rights, says Purshottam Anand, founder of Crypto Legal and India Blockchain Forum member.
Crypto Tax Is A Test
It is reported that Rs 32,000 crore worth of crypto trading volume was shifted to foreign shores between February and October 2022 after the government’s 30 per cent cryptocurrency tax.
The report by the New Delhi-based think-tank Esya Centre said that of the three tax measures announced by the government last year, the one percent tax deduction at source (TDS) was the most destructive for the industry. Indian crypto exchanges lost about 81 per cent of their trading volume between July 1 and October 15, 2022, when it was officially implemented.
Bottom Line
Cryptocurrencies are hard to regulate because of their decentralised nature. However, “India already has a very restrictive crypto regime, with few, if any, legitimate use cases. A complete ban would only be in spirit, as verifying ownership in a wallet is hard. So a ban would be easy to circumvent,” says Utkarsh Sinha, managing director of Bexley, a financial advisor.
The government’s tax rate serves as a deterrent. It also gives the government the flexibility of not having to take a stance on crypto. “The Indian regulators have taken the smartest stance by keeping the underlying regulation grey while taxing gains,” he says.
“I expect the budget to continue to ignore cryptocurrencies, as it’s a prudent policy for now. It might have some mention of taxing gains, and there might be some norms regarding marketing securities and other instruments that invite public participation, but it would be surprising if the latter happens as it inadvertently gives some form of legitimacy to cryptos,” adds Sinha.
Digital assets including NFTs and Cryptocurrencies are an undeniable part of the Indian as well as International economy. There are multiple transactions done via cryptocurrencies and it is important that the government understands the workings and releases a comprehensive set of laws and rules regarding them. Trading of cryptocurrencies is allowed in India and a tax of 30% is charged on them. However, the status of legal tender is not given to Cryptocurrencies and they cannot be used for banking purposes.
The impact of the cryptocurrency ban on the Indian diaspora community is complex and far-reaching. While the ban has disrupted the community’s ability to conduct business and has left many individuals in a state of uncertainty, it is important to remember that the government’s decision was made with valid concerns in mind. Moving forward, it will be important for the government to engage with the diaspora community and work towards finding a solution that addresses their concerns while also ensuring the security of the Indian economy.
WFY Bureau, New Delhi.