Why India is about to clamp down on crypto

Cryptocurrencies have had some ups and downs this year. A dramatic rally during the summer saw Bitcoin, Ethereum and Altcoin hit all-time highs – El Salvador even adopted Bitcoin as an official currency along the way. 

Yet several large nations have expressed concern about them, too. China banned most major cryptos in August, sending the market into disarray, and India are the latest country to introduce an anti-crypto bill. 

The proposed Cryptocurrency and Regulation of Official Digital Currency Bill is set to be announced in the Indian parliament’s winter session, and it appears to severely restrict all private cryptocurrencies. But what are the reasons behind this?

The nature of cryptocurrencies

Governments that are anti-crypto might have a point when they express fears about criminal activity happening through the coins. Crypto’s whole decentralized nature revolves around giving power to the user, rather than the bank, which means their details are always concealed. 

However, they also have many plus sides. Crypto transactions tend to be much quicker and cheaper than via traditional, or fiat, finance methods. They are now available as a payment method in more places than ever, with airlines, online stores and crypto-friendly casinos all accepting virtual currency payments. The Bitcoin network has even handled more payments than PayPal in 2021, with an average of $489 billion in transactions per quarter. 

Yet despite these advantages – and perhaps because of them – the backlash from major nations has been swift. Several national digital coins, known as CBDCs, are said to be in the pipeline, including the Chinese Digital Yuan and Digital Euro. These would give governments more control over the value of cryptocurrencies and how people use them, but it contradicts the very thing that makes crypto so appealing – its autonomy. 

Still, it might not be long before Bitcoin and major altcoins have some government-sanctioned rivals to deal with, as well as restrictive legislation.

India’s ban

India’s hostility towards cryptocurrencies stems from the country’s central bank, RBI. In 2020, the bank tried to impose a two-year ban on digital currency that India’s supreme court overturned. RBI have stated their concern over its stability several times in the past. 

Other reasons may include the influence of China, the dominant power in Asia, and the teething problems that El Salvador has experienced in adopting Bitcoin as an official currency. India also wants to strengthen its grip over crypto so that it can get them in line with national policy, however, this is much easier said than done.

Despite India’s doubts, there is one thing its financial experts do like: blockchain technology. The complex yet efficient framework that cryptocurrencies run on has impressed experts around the world, and India believes that it can thrive without the virtual coins running on of it. 

Countries joining the anti-crypto cause

India, of course, isn’t the only nation with anti-crypto views.

When China outlawed all crypto transactions in September, it was the most drastic action it had taken up to that point. As one of the world’s largest crypto markets — 75% of the world’s crypto energy use took place there in 2019 — its government were determined to crack down on what it referred to as ‘illegal financial activities. It was hardly a surprise: the country had been limiting Bitcoin’s use since 2013. 

Very few other countries have tried to ban crypto-like China have: Bolivia, Indonesia, North Macedonia, Turkey, and Egypt have all introduced measures designed to crack down on its use. However, even with countries that strongly oppose virtual coins, it’s very difficult to stop people from using it.

Many more nations, the most notable being Russia, have banned crypto as a payment method, but mining and trading is still legal. 

While the fear that virtual coins will replace traditional currencies is the driving factor here, ignorance might also be playing a part. The cryptosystem isn’t easy to understand or navigate and it might need a little more time for more nations to come around to the idea that decentralized finance systems aren’t going away. 

Is crypto unstoppable?

Both China and India’s bans impacted crypto markets directly. Bitcoin saw significant dips following each announcement, and El Salvador’s adoption problems didn’t help its value, either. 

Yet the general consensus is that the global impact on crypto will withstand the impact and go on to thrive. China’s ban was probably one of the worst things that could have happened to Bitcoin, yet crypto markets simply bounced back. Even under India’s new bill, users can buy from exchanges that meet certain requirements. 

Many financial experts believe the India bill will just be a small hiccup on crypto’s road to world domination – and if we use the last decade’s progress as evidence, then cryptocurrencies may prove to be unstoppable.