Central bank wants to ban cryptocurrencies

The Indian cryptocurrency market is still reeling from the economic downturn, and it seems the situation will not improve anytime soon. That is because of the sudden slowdown in trading volumes and the new one percent TDS levied by the government that has aggravated the dip in average daily transactions of crypto tokens, such as Bitcoin and Ethereum, in India.

India's central bank wants to ban cryptocurrencies but the government holds the view that a coordinated global effort is needed to make such a move effective. Experts say that they were developed specifically to bypass the regulated financial system and were not backed by any actual cash flow.

In India, it is estimated that nearly 15 million investors invest in cryptocurrencies. India has a large crypto user base, a ban can also lead to users resorting to illegitimate means and black-marketing. The Indian crypto market has been growing at a healthy rate in the past few years and is estimated to reach $241 million by 2030.

Now the Federal Government is also coming out in support of banning digital currencies though it does believe that such a move would be effective only if there is a global consensus around it. The FBI noted that 244 people had already fallen victim to these fake apps.

Finance Minister Nirmala Sitharaman told the Parliament that the RBI has expressed serious concern over the destabilizing effects of crypto currencies on monetary and fiscal stability of the country and suggested framing legislation to govern the sector. This leaves a bigger question mark on the virtual digital asset in a country that boasts the second largest internet market.

"Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards," she said. Experts, policy makers and recently Internet and Mobile Association of India, has turned its back on advocating for crypto last week, citing regulatory uncertainty.

Going forward, even if the government wishes to ban cryptos, enforcement will be difficult given the way blockchain technology works. To enforce a ban, authorities would have to develop a surveillance system that can locate a password or seed phrase. This may potentially end up creating a parallel economy.