Well, hind-sight is 20-20 but let me post-rationalize.<p>India's biggest problem is unofficial economy and low tax base, and is trying to expand tax base and trying to get more and more people into formal economy. Cryptocurrencies are not really tax-base expansion friendly even if regulated. So this makes sense from the point of view.<p>The interesting part here is Government of Andhra Pradesh is a member of Ethereum Enterprise Alliance, so now how are New Delhi and "Amaravati" going to deal with this situation would be interesting.
India has strict laws on tender or cash. Personal foreign currency holdings are severely restricted. So, this doesn't come as a surprise at all.<p>That said,<p>> The regulator, however, decided that it will promote the use of blockchain – a public ledger that serves as the backbone of bitcoin – in financial services for strengthening transparency and improving inclusion.<p>As reported earlier, Wall Street is already cooling down on the blockchain hype:<p><a href="https://www.reuters.com/article/us-banks-fintech-blockchain/wall-street-rethinks-blockchain-projects-as-euphoria-meets-reality-idUSKBN1H32GO" rel="nofollow">https://www.reuters.com/article/us-banks-fintech-blockchain/...</a><p>So, what plans does the RBI have for blockchain?
Well, yes. The Albanian Lotto Riots of 1997 are still remembered, many Albanians lost their shirts over it. People made money through the free markets after the fall of communism, but there wasn't much of a banking system yet or experience with investments, so Ponzi schemers jumped in to fill that need. When these schemes failed, there was rioting that the police and military suppressed only half-heartedly (<i>they</i> had lost hard-earned money themselves), so local gangsters took it on themselves to restore order and became warlords in the process. If this sounds like a big mess, it was. English Wikipedia even calls it a civil war: <a href="https://en.wikipedia.org/wiki/Albanian_Civil_War" rel="nofollow">https://en.wikipedia.org/wiki/Albanian_Civil_War</a>
The sad thing is that while the Indian government has all these regulations to prevent you from holding $2,000 of Bitcoin, or goes on adventures like demonetization disaster which affect ordinary working people, giant scams and irregularities (like Nirav Modi getting away with billions, or prominent citizens being named in the Panama papers) are business as usual.
Anyone who want's some insight/context into India's economic regulatory environment from which these controls came from should watch this (2 part) video:<p><a href="https://www.youtube.com/watch?v=hVwIZzGHxwc" rel="nofollow">https://www.youtube.com/watch?v=hVwIZzGHxwc</a><p>There's a crazy amount of regulation and paperwork for even the most benign business. And much of it differs as you go between the different areas, so businesses that have to say transport goods from Mumbai to New Delhi may have to stop 4-5 times to fill out each regions regulatory paperwork.<p>It's really not surprising to such a top-heavy state being wary of something which seems like it can't be as easily controlled top-down. Which we saw with the "banning" of those paper bills - which had a significant negative impact on the economy, as much of the economy manages to function <i>in spite</i> of those rules, large by side stepping them.<p>India will never catch up to China's growth unless they clean up this mess. And even beyond growth, it benefits no one to have so many businesses feel the <i>need</i> to completely bypass all the rules because they are so bad ones in between the good.
Not unexpected. China might follow suit too. Developing countries who are experiencing capital flight will want to close the cryptocurrency loophole. For the same reasons, our governments are unlikely to want to chase away the golden goose.
Blockchain without decentralization isn't that exciting. The problem with banning crypto is that there will be an entrepreneurial group of people willing to accept cryptocurrencies for a high fee and turn it into fiat or a commodity in a neighboring country. As someone developing in the crypto space, I look at this tech as the formation of a global, secure, always-on, always-accessible, standardized, permission-less database. When people talk of "the cloud" I feel that crypto platforms fit that description more aptly then traditional services.
Since the BJP government took power, India has had multiple faux pas from the central government front. They swapped out Raghuram Rajan with a no name yes man as the governor for central bank. Then they did demonetization, a quixotic adventure at getting rid of black money by making all legal tender obsolete on one fine morning. This caused deaths amongst people standing in queues in front of ATMs. They couldn't print the new money fast enough. To protect the new money from being used in black market, the party spread a rumor about some advanced tech embedded in currency to make it easy to track from satellites. This is demonetization 2.0 and would permanently damage all progress Indian startups made in FinTech space.
I'm surprised they waited so long. But decision meshes well with the government push for government-approved (UPI?) digital payments, all with pretty strict KYC policies.
Indian governance is a mess right now. A govt sending a message like this while collecting tax in parallel from the same system is a contradiction to me.<p>To start with RBI needs to sit with IT dept. And please include some CS professors.
>Accordingly, the RBI has constituted an interdepartmental committee that will submit a report on the feasibility of a fiat digital currency. The committee will submit its report by June-end.<p>Man, I really hope they consider Taler. No blockchain bullshit, but it would be really nice to have a privacy-first digital currency launched in .in
The matter is not entirely clear from the article. Surely they aren't banning individuals from holding bit coins? What does regulated entities even mean: I don't think they mean bitcoin exchanges because they aren't regulated; probably it means banks.
The irony of all these banks and governments banning crypto currency purchases is that all they are doing is strengthening the use case for crypto currencies to begin with. One of the most appealing things about crypto currencies (specifically decentralized ones) is that you are free to hold them and use them however you like.<p>There aren’t restrictions on who you can send them to, what time of the day you can send them, the maximum amount you can send. You don’t have to worry about your bank account being frozen or suspended. You don’t have to wait days for transactions to go through. You don’t need a bank account at all to store them. The more that banks restrict the way people are allowed to use their money, the more it will push people into crypto currencies.<p>State backed crypto currencies are unlikely to succeed in the same way that decentralized ones like Bitcoin are because central control allows the bank or government to print as much as they would like and alter transactions however they see fit. It’s unlikely there will be any sort of public ledger/blockchain or accountability. Eventually people will catch on to this and figure out a way to move back to Bitcoin and others. It may take 10-20 years or longer, but I don’t think this charade is going to last forever.<p>In addition, I am always wary when banks do things like this citing reasons like: “Our goal is to protect our customers. It’s too volatile. It’s used for money laundering.” Banks have never and will never care about their customers. In fact, they benefit from their customers going into debt (credit card fees, loan interest, overdraft fees, etc). How concerned were the banks about issuing loans to customers leading up to the 2008 housing crisis? Money laundering is still primarily done using cash and often with banks turning a blind eye.<p>This is all about banks understanding the threat of crypto currencies and trying to maintain control of the financial system by eliminating any and all competition. They know that widespread crypto adoption will make them obsolete. I think this battle will go on for years, but I think eventually the banks are going to lose. It’s possible that they already know that too.
Cryptocurrency is just high tech money. Governments that ban cryptocurrency just prove that they are obsolete governments.<p>I know this will sound crazy to most people but one of the things I am hoping to see from artificial superintelligence is for repressive outdated human institutions like the large countries to be replaced by systems that are contemporary and functional.
Makes sense.<p>You'd think that country that has issues with tax compliance and has already done things like removing large denomination bills would want to move to a fully traceable currency.<p>Furthermore it would make even more sense that it would use a currency of its own creation rather than one that isn't under its own control.<p>I think most of finance has accepted that cryto currencies are the future, it just won't be bitcoin or Etherium but rather a currency for each country/region just like fiat currencies we currently have.