According to many experts, as cryptocurrencies are simply pieces of computer code, they can’t be banned. Transferring crypto from one wallet to another is no different from sharing music via a pen drive, which means a regulatory ban will not actually take away people’s ability to send crypto to each other.
“Theoretically, yes. You can call it an asset, a commodity, a currency or a security. But fundamentally, cryptocurrency does have a value and liquidity. There are hundreds of millions of people around the world who are willing to hold cryptocurrencies. I can send you some bitcoin, you can send it back. You can call it a currency or not, it does not matter,” Chanpeng Zhao, chief executive officer (CEO) of Binance, the world’s largest crypto exchange, had said last month. ” If there is an agreement, it acts as a medium of exchange,” he added.
Having said that, the government could always create barriers to entry. For instance, most users in India trade on exchanges today because they don’t understand the technical aspects of creating crypto wallets and so on. By banning these platforms, the government could make it difficult for mainstream users to trade in crypto, which brings us to the second point.
Banning crypto is a bad idea
If mainstream users cannot trade on exchanges, they will look for alternative means. As mentioned above, transferring crypto can be as simple as sharing a movie on a USB thumb drive. So, people could technically just find someone who is willing to transfer the fiat equivalent of a particular amount of cryptocurrency to their bank account. In simpler words, the black market trading of crypto.
Black market trading, basically, means you have to find people who are willing to give you fiat currency in return for crypto. In the days before exchanges, this was as easy as being active on popular crypto forums, and the same should be true now as well. Since India still accounts for a very small base of crypto users worldwide, sellers here will be able to sell to anyone in any country, as long as they get the fiat equivalent in a currency they want.
According to many, a ban on cryptocurrencies in India will simply increase the black market trade in the country, which used to flourish before crypto exchanges came to the fore. The ban could reduce the number of buyers for crypto in Indian rupee on any exchange, which means that existing crypto holders will have no choice but to sell their assets off through other means.
Further, the crypto industry also fuels a lot of other innovation in the world today. The blockchain systems defined for these currencies, particularly the Ethereum and Bitcoin chains, are used in making many financial products, and more. Experts say that public blockchain-based products may become impossible to create if a ban is enforced. Essentially, if the government says that you can’t use Bitcoin, then the fundamental blockchain behind that currency also becomes illegal. Or at least that’s what many think will happen.
This could damage innovation for the blockchain industry, which will essentially have to develop their own blockchain platforms from scratch, which costs much more money and time. It’s also like reinventing the wheel, and there’s no guarantee that the industry will be able to come up with better solutions than what already exists.