On 1 February the finance minister of India, Arun Jaitley addressed cryptocurrencies with the following statement:
The Government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system.
Many media outlets then reported that India had banned, or was moving to ban all cryptocurrencies. This is, however, not the case.
There are three main points that Mr Jaitley has made with the above statement.
- The Indian Government does not recognise Bitcoin or any other cryptocurrency as legal tender.
- The Indian Authorities will (attempt) to curb all use of cryptocurrencies for making and receiving payments.
- The Indian Government will crack down on the use of cryptocurrencies used in illegal activities.
The Indian Government does not recognise Bitcoin or any other cryptocurrency as legal tender.
All that this means, is that the government, like virtually every other government on the planet, doesn’t consider cryptocurrencies as money. In fact, the Indian authorities are attempting to change the publics’ mindset by referring to them as crypto assets and dissuading the use of the term cryptocurrency. This is a bad thing in terms of mass adoption for the poor and working class of India. It means that the government would prevent them from using the cheaper transfer costs that cryptocurrencies offer. Bitcoin was invented, not only to create a system that no longer requires trust from a third party but also offers access to banking and low fees. Companies like Stellar has taken this ideology on and improved on the technology. In fact, Stellar is largely targeting developing countries to bring access to financial services to all.
The term crypto assets, as preferred by the Indian government seems to imply that they will allow cryptocurrencies to act in a similar fashion to stocks. This appears to mean that those with some disposable income would still be able to invest in cryptocurrencies.
The Indian Authorities will (attempt) to curb all use of cryptocurrencies for making and receiving payments.
This is self-explanatory and links closely to the above statement. The government will attempt (probably unsuccessfully) to dissuade the public from using cryptocurrencies as money or a payment system. This is kind of impossible, for the simple reason that we use more than just money in our everyday lives anyway. My Starbucks loyalty card allows me to accrue points to use in lieu of money. I’ve traded guitars with someone before, and I’ve even been paid for services with a guitar. By definition, even if you call it a crypto asset and not a cryptocurrency, if it has value, people will use it to get things they want or need. Essentially the Mr Jaitley is saying the government will convince the people of India that they cannot or should not use cryptocurrencies for payments.
The Indian Government will crack down on the use of cryptocurrencies used in illegal activities.
The cryptocurrency element in this statement is totally irrelevant. Governments are supposed to prevent crime. They are supposed to stop any proceeds from criminal enterprise being used by the perpetrators.
Essentially Mr Jaitley hasn’t really said anything that should affect cryptocurrencies in the short term. In the long term, it would be sad to see their government not eventually allow cryptocurrencies to be used for payments, but much of the world is in the same situation, where we just don’t know what our governments will decide. In an interview after his speech, Mr Jaitley confirmed that cryptocurrencies are not being banned:
TV Host: We’ve seen a lot of excitement over bitcoins. Why aren’t you banning it instead of stating it isn’t legal tender?
Jaitley: We are discouraging people from using it now. There is a government committee that’s looking into it right now and they will announce their decisions and next steps after they are done.
In summary, for the time being, there is no ban in India, and there is nothing to be concerned about.