The purpose of this article will be to review the recent decision by the Indian government to summarily ban banks from trading with cryptocurrency.
In specific, this ‘bank ban’ is not something that is new news. The issue, in question, was whether the Supreme Court would uphold the Indian government’s censure/prohibition of Indian financial institutions servicing cryptocurrency exchanges, in specific.
This decision was covered more in depth in this CoinDesk article here:
Now, obviously, the result of this action is that there is effectively no real on-ramp to cryptocurrency in the country of India now.
However, this is something that the crypto space should have anticipated and there is no reason to panic because the impact is negligible, at best.
India Has Never Been a Major Source of Volume
India has never been a major source of crypto volume because of the threat of crypto regulations there as well as the lack of serious financial buying power among the general population as well (they are still a developing economy; different from emerging on several levels).
At the height of trade in the last year, the estimated OTC volume (data from localbitcoins) from India stood at about $3.8M USD daily, which is nothing substantial when considering the $70B+ of traded volume in crypto at that moment in time.
I hate to say it, and I mean this with all due respect to my brethren that are located in India — I’m not sure if the news will really make that much of an impact in terms of the immediate impact on crypto (from a LITERAL perspective).
Now, there’s a chance that whales try to use this information to drive down the price of Bitcoin and other cryptos, but I’m not sure if it’s enough to offset the clear upward momentum that has been experienced in the markets recently.
Financial Institutions and the Economy for India is Unstable
Pretty much the above is why I stated that the role of India at this very moment in time would probably be fairly limited as far as crypto is concerned.
India’s infrastructure is in some serious disarray and so is their financial system. There was a period of time where banks in India were unable to borrow money from their federal reserve system in order to grant loans to other individuals in the country
This has led India (even banks in some cases) to pursue a considerable amount of foreign investment (known as FDI; foreign direct investment)
Foreign Direct Investment
My Thoughts on the Situation
If you want my opinion — the government in India is probably leaning against cryptocurrency because their economy is not strong enough to handle any unanticipated shocks from highly volatile speculative investments, which are what cryptocurrencies are considered to be at this point in time.
Economic stability is always going to transcend any desire for technological innovation/revolution etc.
So, until India’s economic situation improves and they gather more stability, crypto is probably something that they’ll be trying to table for the foreseeable future.
Potential Entry For Cryptocurrency in India
Now, I don’t want to be short-sighted on this issue here…There’s a chance that India and other emerging/developing economies find a way to utilize crypto to their advantage in order to stimulate greater growth in their economies.
In the same way that I mentioned foreign direct investment (FDI) as the primary driver of these economies in many cases — a cryptocurrency that is targeted at facilitating foreign investment into certain projects and undertakings could be a VERY useful tool for countries in a similarly suited economic position.
I have yet to see a crypto project that’s actually targeted at this. In my opinion, this would probably need to be something that’s a bit ‘deeper’ than some coin that you launch with an ICO then throw on an exchange.
It would have to be a technology like an ARDOR or via a company like IBM or ETH, which would help create and manage individualized, private blockchains that are erected solely for the purpose of facilitating foreign direct investment.