FTExample?
Nearly all of us know how the FTX saga is unravelling. Is it an example of the Indian authorities being on point by effectively stamping crypto out of the country?
Looks like we’ve dodged a bullet with FTX. Okay, make it two with Terra Luna. Right. Three with the BTC crash. Fine. Four with the NFT bust.
I give up. As far as current evidence goes, I am nowhere close to building a case against a ban on crypto in India.
Yes, crypto is not technically banned but the taxation laws with a 1% TDS on all crypto transactions, plus 30% capital gains tax, plus non-offset provisions between products has promised a swift kick in the sensitive parts if you dare touch Crypto in our country.
This in turn has led to a drop in an average daily transaction of 88% for one of the leading exchanges in our country.
Additionally, we have hawkish statements from the RBI Governor, T Rabi Shankar, who on Feb 14, 2022 stated “banning cryptocurrency is perhaps the most advisable choice open to India”.
We love bans in this part of the world. We will ban books that hardly anyone has read, let alone a non-regulated asset class that has dropped approximately 74% in one year (BTC has gone from $65,313 to $17362 (rounded off) as I write this).
Why am I then even trying to defend something that is so fundamentally toxic that it has taken down billions in investor wealth all over the world?
Simply because bans do not work.
Drugs, prostitution, ideas, choices. The world has banned them all at various points in time, and met with abject failure that is only countered by fear-mongering in the vein of “but what we wouldn’t have…”
The only thing a ban is sure to achieve is a push of said activity or substance into the grey market where not only are rules absent, but the landscape too opaque for regulators to keep a tab on nefarious activity, till sometimes it become too late.
That, brings me back to the case of FTX, which, if investigated will probably lead to not just financial impropriety where Sam Bankman-Fried and Alameda research created artificial value on self-issued tokens, used those tokens as collateral to take loans and kept the cycle going as long as they could before someone (and there’s always someone) pulled the curtains apart.
Another day, another case to ban crypto then. Yes?
No.
If we are looking at scams and fraudulent activities, the stock market(s) would be one of the first contenders for a ban. Insider trading? Check. Improper financial conduct leading to widespread crashes? Check. Rise and fall in assets not in sync with market realities? Check. Products that are beyond the understanding of the common financial literacy level? Check.
In fact, all currencies that are not backed by physical assets (USD Nixon-era) should come under the scanner too. What if someone decided to print a lot of currency to meet political exigencies?
Hmmm.
But no, we have not banned either currency or financial markets.
Simply because it doesn’t make any sense.
We have kept these institutions, taken the body blows dealt by them, tried to iron out the issues, place regulations and streamline operations, so to make them safer for consumption.
And I propose the same be done for crypto/blockchain. Especially at a time where the space is softer to implement regulation and the regulation-free thinkers of blockchain have had their Satoshi instincts checked-in by massacre after massacre of products in their space.
See. It was easy for the world to ban flying, for it was one of the most unnatural things for humans to do, and thousands would meet untimely deaths.
But the world didn’t.
And yes, thousands have died since. But millions have flown millions of miles as well. With safety and efficiency improving with every incident.
Regulations as progress work hand in hand. And we as a country should forge ahead with progressive thought.
We don’t have to be CZ or Satoshi, but we also don’t have to be North Korea-esq.
Humans will always find a space to build better returns. Either with us, or hidden behind our backs.
Disclaimer: This write-up is not a financial advisory. Please be extremely cautious while dabbling in any asset class.
