If we keep going at this rate, there may be stark divisions in crypto-land — between the major world economies that shun cryptocurrencies and the smaller, less economically stable countries that embrace bitcoin and its brethren wholeheartedly.
Case in point: India seems well on track to ban all private cryptocurrencies. This would have the effect of shutting off a major world economy from the digital upstarts and exchanges that would make a home there, allowing citizens and enterprises to speculate, yes, or make payments with the digital offerings.
In doing so, India seems poised to follow in China’s footsteps. Back in September, China declared all crypto transactions illegal.
Read here: China Declares All Cryptocurrency, Related Transactions Illegal
In that instance, China pointed to the illegal activities surrounding cryptocurrency — money laundering, gambling, pyramid schemes — and went so far as to name bitcoin, ether and tether as examples.
The mandate, as we pointed out back then, also affects businesses beyond Chinese borders, making it a crime for crypto services operated by overseas exchanges to conduct digital transactions with people in China.
There are echoes of all this in India’s presumably forthcoming ban.
As reported by sites such as India Today, India’s government will present a bill in the upcoming winter session of parliament that paves the way for central bank digital currency (CBDC) issuance, presumably at the expense of private cryptos. The bill will reportedly be titled The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. The bill would look to create a framework for the digital currency and at the same time, prohibit cryptos — with a notable exception of cryptos that help promote blockchain.
We contend that this is an important distinction: India’s government finds promise in the blockhain, which is, really, the infrastructure that underpins cryptocurrency issuance and transactions. As to just where cryptocurrencies might be “allowed,” we note there’s room to allow cryptocurrencies to be issued as assets, but not to be used in payments.
Read also: India Mulls Crypto as Assets, Leaving Payments off the Table
As to the reach and scope cryptocurrency has in India, at least at present: Per Reuters, there are between 15 million to 20 million crypto investors in India, holding crypto worth about $5.3 billion USD. Not massive penetration by any means, but it’s a likely bet that the crypto-related legislation and ban will put a dent in those numbers.
By banning cryptocurrency from having a wider presence within the economy — i.e., from financial services, from payments — the reserve bank gets to issue its CBDC without competition. This is a strategy that is already being actively pursued in China, where a national rollout of the digital yuan is just a few months away.
In the meantime, we may see bitcoin and other alternative coins — shut out as they are, and will be, from major trade corridors and consumer transactions — increasingly consigned to smaller economies. El Salvador stands as a key example here.
The divisions between where bitcoin is and will be welcomed and where it is and will be shunned are growing ever starker.
Read more: Volcano to Power Miners in El Salvador’s Bitcoin City
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