India against Crypto?
Imagine this, you are a medieval being enjoying the meat of a wild boar you just hunted, or for the vegan/vegetarians, make it a fresh fruit you just plucked off of a tall tree due to your hunter instincts or your athleticism. Now another one of your medieval buddies, stronger and bigger than you, comes along and takes what you’re eating because he’s hungry. You being the smarter of the two, decide to create a system where you get something in return for being hungry. However, he is the bigger being (literally) and doesn't need to conform to your system but decides to accept and live peacefully. Now over the years, you realize this is not working since he can always get what he wants forcefully, so you select a few members from your [clan?] and let them police all the transactions. This now becomes too complicated as the people you chose to do the same cannot verify the equity in value received to both parties. This directly leads to them assigning an amount of gold/gem/bones (let’s say each worth a different amount) to each item to be transacted. This now means for every fruit you give, you get some shiny object as a possession, and you can provide the same to the bodyguards you’ve always wanted to hire.
This is exactly what the current economic framework looks like. “Money,” as we know it is just an accepted form of value transfer for us to live peacefully. This form of value transfer has to be regulated and good reason, which should be evident enough by now. The money is the gold/gems seen previously, and the group who policed these transactions is our government or banks, who handle our money. So everything works well right?.
Now let’s get on another train of thought, let's put you in medieval times again. The group handling the transactions is storing the transactions and values assigned to each item in a book only accessible to the group members. Now, what if one member of that group seems to dislike you. Every transaction you make can be modified and unfortunately not in your favor too, a fraud-proof system is needed to be designed to avoid this. On further investigation, you realize there are many such flaws in the current system. Mainly, anyone can disguise as you and carry out unwanted transactions for you; the group can turn your net value possessed to zero in a matter of seconds, the physical possessions are difficult to store securely, the middle man in your transactions is causing a nuisance in the value transfer, so clearly, the system is not the best. Still, it cannot be changed so easily since if you remove the third-party middle man, you are back to square one of not verifying the equity of value transfer.
This, although is a highly simplified view of what flaws the current system has, is written with the intent to make you understand why crypto-currency is needed. This article doesn't discuss how cryptocurrencies solve the problems caused by fiat currencies being handled by banks but rather what India’s position on the same has been. Those who don’t know what fiat currencies are they are basically government-issued currencies without any physical commodity backing.
Now coming to whether India is against cryptocurrency. From the first press release on December 24, 2013, on February 1, 2017, by RBI, the Indian Govt has cautioned holders and traders against virtual currencies, an electronic representation of value. There was always resistance, but the acceptance rate of these virtual currencies has consistently trumped the same.
In November of 2016, when the demonetization of over 86% of cash in circulation promoted digital currencies, these virtual currencies skyrocketed in their popularity with the extremely lucrative increase in value these had shown in years leading up to this. A committee formed in the year 2017 following this rise in popularity of such currency scrutinized such currencies' usage and impact. They submitted their decision in the year 2019, with a final verdict being in the form of a ban proposed on private cryptocurrencies.
It is although to be noted that there was no legal action taken against cryptocurrencies until the Union budget statement in 2018 refused to recognize cryptocurrency as legal tender, following which in April of 2018, a circular released by RBI prohibited banks to deal with exchanges dealing in VCs to avoid the money in circulation being funneled into virtual currencies. This ban lasted almost two years till 4th March 2020, when it was lifted in the IAMAI vs. RBI case, with a three-judge bench of the supreme court of India regarded the circular as disproportionate.
However, the debate has been on since the introduction of “Banning the Cryptocurrency and Controlling the Official Digital Currency Bill 2019”. As of now, in the year 2021, there has been the announcement of the “Cryptocurrency and Regulation of official digital currency Bill 2021” in this year's budget session, which aims
“To create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Just to put this all in perspective:
2013: RBI issues a press release cautioning users and holders against the virtual currencies
2016: Demonetization in India promoted digital currencies, so a natural increase in the virtual currency acceptance rate was seen
2017: A committee is formed for the scrutiny of virtual currencies in the economy, and another press release is issued in Feb serving a purpose similar to the press release in December of 2013
2018: RBI prohibits banks from dealing with exchanges that traded virtual currencies
2019: Introduction of the“Banning the Cryptocurrency and Controlling the Official Digital Currency Bill 2019” sparking a long-lasting debate for years to come
2020: As a result of the case IAMAI vs. RBI, the 2018 prohibition to the banks to deal with VC exchanges was lifted
2021: “Cryptocurrency and Regulation of official digital currency Bill 2021” has been introduced, showing a move in a positive direction
In the 2nd February 2021 session of the Rajya Sabha, the conversations made it clear that the introduction of “blockchain” technology in the economic view will be a proactive venture, but any virtual currencies remain illegal tender in India.
Conclusion
A clear resistive lawmaking strategy is evidently being seen. It wouldn't be wrong to say India is against cryptocurrency. At this point, these views remain speculative since there are multiple sources citing different sides of the coin. Indian investors still remain hopeful.
P.S: This article is purely informative, and no political views are expressed in this. The pros and cons of cryptocurrencies can be debated for years; this article tries to capture India's views on cryptocurrencies and the steps taken in this area.
Open to all suggestions and feedback. Thanks for reading :)