It’s been debated all over the world by all world governments whether to ban the cryptocurrencies or regulate them. It is a big conundrum for them. Indian Government is not immune to the idea of banning or regulating crypto. So far RBI has issued many notices about stay away from cryptocurrencies, as it is a very risky investment. Recently, you might have seen the discussion about bitcoin in Parliament. Where some of the ministers calling it as a bubble and how to protect people from investing. Right now bitcoin is neither legal nor illegal in India.
So if the Government decides to ban it or make it illegal, let’s see what will happen?
1.Panic Sell
If this is announced many people who invested money in crypto just to make some quick bucks without understanding the future potential of its technology will be the first one to leave the market. Which might not affect the price of BTC considering the low volume traded in India compared to the whole world. It was 10% in Jun 2017.
2. Increase the Demand
Banning BTC means putting it on the black market. Same like Marijuana which is illegal but you can get it almost everywhere. Let’s say India ban BTC when the price is $15K/BTC. Right now there are 96 countries including India where Bitcoin is unrestricted. After the Ban there will be 95 countries. Out of these 95 countries some of the countries will regulate Bitcoin which will surge the price up and considering the popularity of BTC people will try to get hold of it from the black market even at higher price. Possible scenario, people will try to get Bank accounts in those countries or move there.
3. Increase in cash trading of bitcoin or with wallets like Paytm
The most important thing can governments really Ban bitcoin? The answer is NO. All they can do is make it difficult to buy it or sell it. They can ban all centralized exchanges like Zebpay, Unocoin etc. but they cannot completely ban BTC. Let’s say they banned all exchanges, but that’s not stopping people trading bitcoin with cash or mobile wallets like paytm.
4. Decentralized exchanges
Government will might be able to ban centralized exchanges like Zebpay etc. But they won’t be able to shut down decentralized exchanges like Localbitcoins.com, Etherdelta.com etc. It will also increase transaction volume on these sites. Currently on localbitcoins it is 592,222,314.58 INR /month which will definitely be 10X after the Bann.
So ultimately banning BTC is not a solution for any Government, more efficient solution is to regulate it up to certain extent so that the fraud and scams can be minimized. Indian Banks need the Blockchain technology for their more efficient functioning, SBI(one of the biggest bank in India) announced BankChain, which is a platform for banks for implementing blockchain software.
Most likely Indian Government will not Bann Cryptocurrencies, but sooner or later they will come up with very innovative way to collect taxes on it.
Scenario for Governments to Bann BTC is like this.
Crypto Currency is so revolutionary that it will turn centralized governments on their head. Power is shifting and centralized authorities are operating from a position of panic, not reason. Creativity is the currency of the future.