Crypto trades in India may go underground if banned
NEW DELHI: An overarching ban on private cryptocurrencies in India might lead investors, who poured large sums of capital into crypto assets over the last few years, to take their business to underground markets, said industry experts.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is scheduled to be tabled in the ongoing budget session of Parliament. The bill seeks to prohibit private cryptocurrencies in India. “The fact is crypto runs on the internet. The control does not rest with one person, one organization, or one country. Hence, it is not possible to ban crypto trading,” said Kumar Gaurav, founder and chief executive of online banking platform Cashaa.
Gaurav said the government can ban the “legitimate use of crypto”, which will eventually lead to international trading or the rise of the black market in India. “People might still trade but it will become difficult to track within the country.”
“When the banking ban came in the last time, people were stuck. Exchanges were asking people to withdraw their money, but investors were holding on, hoping to take their assets offshore,” said a senior industry professional, requesting anonymity.
He was referring to the Reserve Bank of India’s (RBI) ban on cryptocurrencies, which was later quashed by the Supreme Court in March 2020.
News reports said the government will give 90 days or more for people to sell their crypto assets, but this may not be feasible either. According to executives from two top crypto exchanges in India, the ban would create an environment where there are many sellers but no buyers. This will further drive people towards underground markets, or to take their money offshore.
The industry professional quoted above said crypto exchanges had hundreds of crores stuck in bank accounts when a ban was enforced last time. “There is a chance that people will move offshore, to foreign exchanges.”
“There’s a large possibility (of underground markets rising),” said Nishcal Shetty, founder of WazirX, the largest crypto exchange in the world.