Will India Lose More Than Gain from a Crypto Ban?

India has a tumultuous take on cryptocurrency with regulators and governments unable to build a unanimous decision regarding its trading for long. Ever since The Cryptocurrency and Regulation of Official Digital Currency Bill,2021 made its way to the list of Lok Sabha agendas on 29 January 2021, this discussion on loss and gain with the cryptocurrency ban is doing the rounds.

However, the bill remained in the list of agendas alone and was never discussed in the budget session 2021. Citing the delay in the introduction, consideration, and passing (as mentioned under the ‘Motion proposed to be moved” column of the Lok Sabha Bulletin – II), and the shift in the opinion of involved ministers over time, crypto stakeholders are optimistic about a possible regulation rather than a ban on cryptocurrency trading. While speaking on the matter, the incumbent finance minister, Nirmala Sitharaman has signaled that the government is thinking of a “calibrated approach” and leaving a window open for experiments in cryptocurrency and blockchain technology.

The first real intent of governments on crypto trading regulations can be deciphered from the 26 March move of the Ministry of Corporate Affairs (MCA) asking exchanges or trading companies in the country to mandatorily disclose any dealings in cryptocurrency or virtual currency in their balance sheets. It’s to be effective from April 1, 2021. The MCA is exercising its power based on the latest amendments to the Schedule III of the Companies Act, 2013. The following disclosure is required: The amount of holding and the Details of deposits or advances from any person for the purpose of trading or investing in cryptocurrency or virtual currency, The Blockchain and Crypto Assets Council (BACC) of the Internet and Mobile Association of India (IAMAI) has welcomed the government’s move.
Will India lose or gain if a crypto ban takes place? Here is a detailed analysis.

Loss

Let’s see who can be the big losers

Investors

Today India has over 75 lakh cryptocurrency investors who’ve collectively poured in over Rs 10,000 crore. The outright ban will disappoint the investors. Ajeet Khurana, Former CEO, Zebpay and Angel Investor while talking to Quint, says that more people have started investing in bitcoin than those leaving it in recent times. The number has increased significantly despite the government’s lackadaisical approach. If the government confiscates their money too, which is one of the rarest possibilities, it will affect their financial health. Citing the growing patronage of cryptocurrency trading, it’s difficult for the government to put a check on its trading.
Exchanges

Today, India is home to around 20 crypto exchanges like PCEX Membre , wazirx etc and they allow hundreds and thousands of traders to trade in spot, derivatives, and options markets. With the growing worth of the trading , you can imagine the amount of damage incurred to the crypto ecosystem with the blanket ban on its trading.

These exchanges are attracting retail as well as institutional investors. So, the cryptocurrency ban will, needless to say, affect the business of related exchanges and people employed there.
Governments

Lack of clarity on crypto regulation or a complete ban will stop the income sources for the government exchequer through direct (corporate tax, GST, and income tax) and indirect taxes. The ambit of indirect taxation has no limit. Citing India’s third rank on the list of top 10 global economies by GDP, it’s a critical time for the government to adopt consumer-friendly laws and regulations to capitalize on the potential. A positive take from the government will boost the confidence of investors and crypto exchanges alike.

Gain

Certainly, losers are many, but when it comes to gain makers, there are only two possible segments.

Banks

The drop in bank’s interest rates has shifted the focus of investors to alternative investment, and crypto trading owing to its quick and high returns has captured their attention. However, with the government’s decision to ban, those conventional investors will once again move towards banks. This will cause a spur in the banking assets.

Insurance firms

Insurance firms have never been the choice of investors, particularly, those who are interested in a higher return on investment, but they are likely to make small gains if the cryptocurrency ban becomes a reality.

Stocks/shares market

With the ban on crypto trading, traditional equity instruments like stocks and shares will once again become the primary attention of investors. This will help corporates to raise more funds from the market and reach their objectives. The development will boost the earnings of asset management brokerage firms or individual brokers, who earn from the commission.

Loss Vs Gain

It’s no brainer that every business endeavor needs investors, and it’s clear that the interest of the investors goes with the continuance of cryptocurrency, not in its ban. The winners from the ban as discussed above like banks, insurance firms, and stocks or shares markets also rely on the investors. Investment is not a destination but it’s a journey. When investors are happy with their return on investment, they invest further and do not hesitate in taking risks to gain more. So, the economy as a whole will only suffer if a crypto ban happens, and perhaps, that’s the catch that makes the regulators and governments think more rather than taking a hasty step in putting a ban over its trading.

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