In my first part, I had written on the genesis and growth of Cryptocurrencies led by Bitcoin. There are more than 10,000 cryptocurrencies in existence as of November 2021. India has over ten exchanges in dealing with a dozen popular cryptocurrencies. A leading crypto exchange founder claims that the global crypto population is in the 150 to 200 million range. India has about 15 to 20 million users currently. Indian investment in cryptocurrency is estimated to be around US$ 10 Billion.
The Chinese government has banned all private cryptocurrencies, which includes mining, investing, and trading. On the other hand, India has lagged in its understanding of the impact of cryptocurrencies as an alternative source of stashing black money, roundtripping funds. The dangerous element of cryptocurrencies is that they are used for drug and arms trade, affecting the country’s sovereignty.
Faced with a poor investment climate, despite tall claims by the Centre and the States after unearthing huge scams by Chanda Kochar of ICICI, Nirav Modi, Mehul Choksi and Vijay Mallya, which may be tips of icebergs. The banks’ officials had to save their jobs and pensions and promptly tightened their lending, imposing stiff lending terms. It resulted in heavy deposits and less demand for loans. It would have meant only one thing, a fall in Industrial output, which the government could not afford. Covid added to the misery as the interest rates were slashed steadily, both for the banks’ deposits and lending.
India has 58 million people under various pension schemes, who could depend on balancing the ever-rising living costs with interests earned from bank deposits. The lower rates have made many run to the risky bourses, which are risky. Indian bourse crashed by 1688 points on Friday over the fears of new mutant Covid variants, wiping off Rs.7.68 lakh crores of wealth.
The youth increasingly rely less on the government and rebel against constricting systems. In the words of Matt Stoller, the author of the book Goliath, one of the best books of 2019 on how to improve the economy by rethinking capitalism, “Crypto is an angry rebellion against a crooked system organised by billionaires based on enticing the rebels into an even more crooked system organised by different billionaires.”
Unless the laws are changed, Cryptocurrencies do not contribute to the economy, which makes it worse. Internationally enforceable laws must evolve to regulate the cryptocurrency, ensuring safety and transparency, which might conflict with the basic idea of deregulated cryptocurrencies.
I would not invest in an invisible asset with anonymous owners. A hack or a crash in the system could wipe the entire fortunes of many chasing better returns in the absence of alternatives. Anyway, the parliamentary discussion over cryptocurrencies could last a few months. Until then, both the coin desks and investors can see their fortunes change, for the better or worse.
Sampath Kumar
Intrépide Voix
