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India’s Central Bank Bans Regulated Entities From Dealing In Virtual Currencies
- tiemand 9y agoThis is good for bitcoin
- chollida1 9y agoMakes sense. You'd think that country that has issues with tax compliance and has already done things like removing large denomination bills would want to move to a fully traceable currency. Furthermore it would make even more sense that it would use a currency of its own creation rather than one that isn't under its own control. I think most of finance has accepted that cryto currencies are the future, it just won't be bitcoin or Etherium but rather a currency for each country/region just like fiat currencies we currently have.
- paulie_a 9y ago> I think most of finance has accepted that cryto currencies are the future I genuinely hope you don't believe this. Some, not most, are toying with them like a cat batts around a ball.
- losteric 9y ago> most of finance has accepted that cryto currencies are the future [citation needed]
- deleted 9y ago[deleted]
- josu 9y ago>I think most of finance has accepted that cryto currencies are the future, it just won't be bitcoin or Etherium but rather a currency for each country/region just like fiat currencies we currently have. We don't know what the future will bring. But each country with its own cryptocurrency doesn't look like an equilibrium to me. I don't think that advance economies will ever fully outlaw bitcoin, so if it, in fact, becomes a store of value, developing economies will eventually adopt it, even if it's behind their government's back.
- ashraymalhotra 9y agoCould you please explain why will the advance economies never fully outlaw it? As far as I can understand, till bitcoin is a niche miniscule part of the economy, they might not care. But if it starts to become mainstream, I don't see how being developed or undeveloped would make a difference? All governments want to have control over the currency...
- josu 9y agoDue to the fact that most advance economies are also advance democracies. I agree with your point, that government's will certainly try to regulate it but I don't think they will outlaw it. They may regulate it enough, so it never becomes a medium of exchange, and therefore it doesn't turn into a threat to sovereign currencies. But I don't think they will fully outlaw it, since there is no reason to restrict the options that citizens have to invest in. If people can invest in wood or orange juice futures, there is no reason, not to allow them to invest in cryptocurrencies.
- ska 9y agoGovernments don't outlaw all speculation (which is what cryptocurrencies currently are), or for that matter actual investments for the most part. They regulate them to ensure that mostly people aren't being robbed blind, and they want their cut (i.e. taxes). So long as you aren't hoping to use them as a tax fraud scheme I don't see why you would expect the government to want to shut it down. If you do hope to use it as a tax fraud or the like, you're likely in for an unpleasant time once the slow-but-steady process starts to focus on that.
- deleted 9y ago[deleted]
- snitko 9y agoCryptocurrencies don't make any sense unless they're decentralized and not controlled by governments. That's where the value is. Bitcoin has value because it cannot be controlled, printed (inflated) or easily confiscated. It gives financial sovereignty and freedom. But, it's not for everyone. You obviously believe that governments need to control finances. That's fine. I think most people don't want freedom. But there's certainly SOME percentage of the population that really want and value freedom. That's why Bitcoin has and will continue to have value.
- nopinsight 9y agoDevil’s advocate: Financial freedom requires freedom from forceful confiscation. Thus, without a military backing of some sort, perhaps by the sovereign nation state the crypto’s owner resides in, cryptocurrencies will always be vulnerable to real-world regulations and bans.
- snitko 9y agoForceful confiscation is pricey if you don't know whom to confiscate it from and how. A person may not have bitcoins. Or he might have it stored securely in another country to which he doesn't have immediate access. Those who have a lot already prepared themselves accordingly. And confiscating a little from many people is really pricey.
- nopinsight 9y agoI agree that confiscation requires knowledge on who the owners are and rough amounts they own. With that knowledge, physical threats to demand exchanging cryptos for safety or freedom could be used quite efficiently depending on the laws and customs of each country. The fact that the assets may not be easily traceable make them a more lucrative target for criminals to use unlawful threats against innocent owners as well.
- wyldfire 9y agoConfiscation is, as you've identified, fruitless. Only governments without level-headed leaders will try. Global regulation remains a risk for cryptocoins. If the only remaining utility is the black/grey market, cryptocoins become much less valuable and will end up losing a lot of interest.
- sremani 9y agoWell, hind-sight is 20-20 but let me post-rationalize. India's biggest problem is unofficial economy and low tax base, and is trying to expand tax base and trying to get more and more people into formal economy. Cryptocurrencies are not really tax-base expansion friendly even if regulated. So this makes sense from the point of view. The interesting part here is Government of Andhra Pradesh is a member of Ethereum Enterprise Alliance, so now how are New Delhi and "Amaravati" going to deal with this situation would be interesting.
- pm90 9y agoThere are many bans in place in India but the law enforcement agencies infrequently enforce anything. There are building regulations that are flouted openly, environmental regulations that are frequently ignored. I don't think this would affect the black market as much. Of course there is the other aspect that cryptocurrencies are probably not very well known yet to those that operate in the black market ...
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- starving_coder 9y agoWith the alliance, Govt of AP is primarily aiming at integrating blockchain tech in to governance and that's that. Their vision is still perfectly aligned with RBI guidelines and will perfectly act as a case study for the rest of the states to follow should things fall in place. Not sure what "situation" are you hinting at.
- deft 9y agoPeople don't understand the EEA. They think it means "these partners will use the publicly traded ETH asset"
- deleted 9y ago[deleted]
- amrx101 9y agoThe government is endorsing block chain but for some reason decided to block crypto.
- lumberjack 9y agoNot unexpected. China might follow suit too. Developing countries who are experiencing capital flight will want to close the cryptocurrency loophole. For the same reasons, our governments are unlikely to want to chase away the golden goose.
- hackme1234 9y agoDoes China even have official exchanges? Binance works from Hong Kong afaik.
- lumberjack 9y agoThe exchanges are not essential for capital flight. What China needs to ban, is Bitcoin mining, which does happen on the mainland.
- HarryHirsch 9y agoWell, yes. The Albanian Lotto Riots of 1997 are still remembered, many Albanians lost their shirts over it. People made money through the free markets after the fall of communism, but there wasn't much of a banking system yet or experience with investments, so Ponzi schemers jumped in to fill that need. When these schemes failed, there was rioting that the police and military suppressed only half-heartedly (they had lost hard-earned money themselves), so local gangsters took it on themselves to restore order and became warlords in the process. If this sounds like a big mess, it was. English Wikipedia even calls it a civil war: https://en.wikipedia.org/wiki/Albanian_Civil_War https://en.wikipedia.org/wiki/Albanian_Civil_War
- mercer 9y agoWhatever word is appropriate, it was basically a complete disappearance or the rule of law. Basically, imagine all the police and military disappearing instantly, in a country that was already quite corrupt and infantilised by communism (not that I'm sure a more 'civilized' country would do any better under the circumstances).
- mercer 9y agoI don't usually do this, but I'm very curious why this might warrant downvotes?
- ilaksh 9y agoCryptocurrency is just high tech money. Governments that ban cryptocurrency just prove that they are obsolete governments. I know this will sound crazy to most people but one of the things I am hoping to see from artificial superintelligence is for repressive outdated human institutions like the large countries to be replaced by systems that are contemporary and functional.
- hcnews 9y ago> Cryptocurrency is just high tech money. Crypto was referred to as drug/illegal money in its early days.
- Latteland 9y agoHow should India tax people? Society and government won't succeed without income to provide for things like police, military, inspectors to make building construction safe, food inspectors. It's just crazy to think that we can just live in an anarchy where only rich people can afford safety.
- MichaelGG 9y agoA friendly AGI would replace so, so much more than just banking or institutions it makes no sense to even bring it up. And this does not make them obsolete. The government will easily win. Bitcoin wouldn't have near the amount of adoption, even for drug markets if it was made illegal. I don't get how anyone thinks governments are so weak or powerless. How some fancy math obsoletes or in any way inhibits a coordinated group with weapons and societal backing to use force. Edit: And I like bitcoin and have been playing with it for years, when CPU mining worked. Enough so that I could retire if I find my all my old hard drives. I think it's cool and I don't buy into the existence of money laundering other than a fake crime used by lazy prosecutors and greedy governments. But still saying that government is obsolete... come on. Forget crypto, governments are moving towards banning cash which is far more threatening to our liberties.
- X6S1x6Okd1st 9y agoPlenty of countries limit exchange of their local currency to other currencies. What are you on about with AI, that seems unrelated.
- thisisit 9y agoIndia has strict laws on tender or cash. Personal foreign currency holdings are severely restricted. So, this doesn't come as a surprise at all. That said, > The regulator, however, decided that it will promote the use of blockchain – a public ledger that serves as the backbone of bitcoin – in financial services for strengthening transparency and improving inclusion. As reported earlier, Wall Street is already cooling down on the blockchain hype: https://www.reuters.com/article/us-banks-fintech-blockchain/wall-street-rethinks-blockchain-projects-as-euphoria-meets-reality-idUSKBN1H32GO https://www.reuters.com/article/us-banks-fintech-blockchain/... So, what plans does the RBI have for blockchain?
- JumpCrisscross 9y ago> what plans does the RBI have for blockchain? Same ones my buddy at State Street did: say “blockchain” to a superior to get budget for long-needed database (and other back office) upgrades.
- artmageddon 9y agoSo that's what I should've done while I was there so we could've gotten a legit database to handle our yield curves processing! We were expected to do everything in Excel, and if we were lucky, MS Access :|
- kylehotchkiss 9y agoI'm surprised they waited so long. But decision meshes well with the government push for government-approved (UPI?) digital payments, all with pretty strict KYC policies.
- runewell 9y agoBlockchain without decentralization isn't that exciting. The problem with banning crypto is that there will be an entrepreneurial group of people willing to accept cryptocurrencies for a high fee and turn it into fiat or a commodity in a neighboring country. As someone developing in the crypto space, I look at this tech as the formation of a global, secure, always-on, always-accessible, standardized, permission-less database. When people talk of "the cloud" I feel that crypto platforms fit that description more aptly then traditional services.
- chris_wot 9y agoWhy permissionless though? Why do you need that quality?
- saurik 9y agoIf you need someone else's permission to use it, then that person is both a bottleneck and a source of control with power that is likely to be abused. It is really important that these systems be "permissionless" in order to be legitimately decentralized. (Though I wonder if you ask that because you think the term means something to do with data control. It doesn't.)
- chris_wot 9y agoI know exactly what "permissionless" means in this sense. However, given the only way that a transaction is materialized in the blockchain is for a block to be mined by someone, that sounds like a bottleneck to me. A pretty bad one if Proof of Work is being used!
- ateevchopra 9y ago"Blockchain without decentralization" is just plain database. Truly said, it's nothing exciting.
- tluyben2 9y agoWell, it's even worse than not exciting; it's very slow database, so not the benefits of blockchain and not the benefits of modern dbs.
- craigc 9y agoThe irony of all these banks and governments banning crypto currency purchases is that all they are doing is strengthening the use case for crypto currencies to begin with. One of the most appealing things about crypto currencies (specifically decentralized ones) is that you are free to hold them and use them however you like. There aren’t restrictions on who you can send them to, what time of the day you can send them, the maximum amount you can send. You don’t have to worry about your bank account being frozen or suspended. You don’t have to wait days for transactions to go through. You don’t need a bank account at all to store them. The more that banks restrict the way people are allowed to use their money, the more it will push people into crypto currencies. State backed crypto currencies are unlikely to succeed in the same way that decentralized ones like Bitcoin are because central control allows the bank or government to print as much as they would like and alter transactions however they see fit. It’s unlikely there will be any sort of public ledger/blockchain or accountability. Eventually people will catch on to this and figure out a way to move back to Bitcoin and others. It may take 10-20 years or longer, but I don’t think this charade is going to last forever. In addition, I am always wary when banks do things like this citing reasons like: “Our goal is to protect our customers. It’s too volatile. It’s used for money laundering.” Banks have never and will never care about their customers. In fact, they benefit from their customers going into debt (credit card fees, loan interest, overdraft fees, etc). How concerned were the banks about issuing loans to customers leading up to the 2008 housing crisis? Money laundering is still primarily done using cash and often with banks turning a blind eye. This is all about banks understanding the threat of crypto currencies and trying to maintain control of the financial system by eliminating any and all competition. They know that widespread crypto adoption will make them obsolete. I think this battle will go on for years, but I think eventually the banks are going to lose. It’s possible that they already know that too.
- jopuwep12489 9y ago>They know that widespread crypto adoption will make them obsolete. Could be true. But are we seeing adoption grow? I see a lot of merchants ending support for bitcoin and other crypto-currencies. I think more people use it as a speculative investment than as a currency right now.
- dmix 9y agoAnyone who want's some insight/context into India's economic regulatory environment from which these controls came from should watch this (2 part) video: https://www.youtube.com/watch?v=hVwIZzGHxwc https://www.youtube.com/watch?v=hVwIZzGHxwc There's a crazy amount of regulation and paperwork for even the most benign business. And much of it differs as you go between the different areas, so businesses that have to say transport goods from Mumbai to New Delhi may have to stop 4-5 times to fill out each regions regulatory paperwork. It's really not surprising to such a top-heavy state being wary of something which seems like it can't be as easily controlled top-down. Which we saw with the "banning" of those paper bills - which had a significant negative impact on the economy, as much of the economy manages to function in spite of those rules, large by side stepping them. India will never catch up to China's growth unless they clean up this mess. And even beyond growth, it benefits no one to have so many businesses feel the need to completely bypass all the rules because they are so bad ones in between the good.
- hangonhn 9y ago"It's really not surprising to such a top-heavy state being wary of something which seems like it can't be as easily controlled top-down" I don't disagree with your analysis but I think the conclusion is debatable. The problem isn't India is top-heavy, China is too. The difference is that China is highly centralized. It's been that way since the Qin dynasty. The Qin dynasty standardized everything from weights, measures, and even the language itself. The example you cited is a problem of standardization. If all the paper work is the same, the process should be pretty simple and efficient. That said, India is a VERY diverse country and seems very tolerant of differences. Part of this may be because India was not historically centralized nor homogenized. Just as a personal opinion, it would be a shame for India to lose its cultural diversity in its pursue of growth and efficiency. Once you lose the culture, it's really, really hard to bring back.
- newyankee 9y agoTrue, but taxes like GST are really trying to make all this easy. Change comes slowly in India and off late there have been some changes that were once thought impossible to implement (like GST)
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- craptocurrency 9y agoBy looking at how terrorists fund their activities across India, this is a wise move.
- cvaidya1986 9y agoEarly adopters to the blockchain and crypto market will position themselves favorably in ten years.
- harichinnan 9y agoSince the BJP government took power, India has had multiple faux pas from the central government front. They swapped out Raghuram Rajan with a no name yes man as the governor for central bank. Then they did demonetization, a quixotic adventure at getting rid of black money by making all legal tender obsolete on one fine morning. This caused deaths amongst people standing in queues in front of ATMs. They couldn't print the new money fast enough. To protect the new money from being used in black market, the party spread a rumor about some advanced tech embedded in currency to make it easy to track from satellites. This is demonetization 2.0 and would permanently damage all progress Indian startups made in FinTech space.
- harichinnan 9y agoWhy would you just downvote this without posting your disagreement. This looks like an attempt to censor anyone who's not thrilled with the Modi government. I didn't know HN also had armies of Sanghies.
- rajathagasthya 9y ago> This looks like an attempt to censor anyone who's not thrilled with the Modi government. I didn't know HN also had armies of Sanghies. Please keep Reddit and Twitter-like comments out of HN.
- shripadk 9y agoSame Raghuram Rajan knew about the massive PNB bank scam and did nothing?
- captn3m0 9y ago>Accordingly, the RBI has constituted an interdepartmental committee that will submit a report on the feasibility of a fiat digital currency. The committee will submit its report by June-end. Man, I really hope they consider Taler. No blockchain bullshit, but it would be really nice to have a privacy-first digital currency launched in .in
- CryptoPunk 9y agoI've said this before but it bears repeating: GNU Taler wants to give the government a backdoor. That's privacy in the same way the Clipper chip in the 1990s was privacy.
- firasd 9y agoThe sad thing is that while the Indian government has all these regulations to prevent you from holding $2,000 of Bitcoin, or goes on adventures like demonetization disaster which affect ordinary working people, giant scams and irregularities (like Nirav Modi getting away with billions, or prominent citizens being named in the Panama papers) are business as usual.
- mx92je082 9y agoA few tweaks to the phrasing and you’ve basically described all nation state behavior and the entire history of human attempts at “society”. Power brokers control the activity and discourse of the populace. Ignore the rules for personal enrichment (the US Congress and others pass rules for us [ banning insider trading] but not them). This isn’t just an India thing
- m_alexgr 9y agoVery true, most assuredly not just an India thing.(although perhaps India is a well known example) The basic premise, stated another way, is that power tends to corrupt.
- onecooldev24 9y agoEventually Bitcoin or the fiat currency goes to zero. I think Indian politicians made the wrong choice.
- hndamien 9y agoZero! That is extremely wishful thinking. Even as a historical artefact Bitcoin will never go to $0. Hell, Bitconnect is still trading at $0.69 with $13,000 volume today. I really hope this is wash trading.
- elevenoh 9y agoBitcoin will be a multi-decade artifact at minimum. A novel collectable.
- onecooldev24 9y agoNo fiat currency will go to zero.
- hndamien 9y agoNot 0 due to the cost of printing, but 4.2 trillion Marks to $1 USD in Weimar Germany 1923 is pretty close. Given that they aren’t in circulation now, I think we can assume at least some period of 0.
- flowctrl 9y agoAnother positive step in the demise of the traditional banking system.
- kang 9y agoIndian governance is a mess right now. A govt sending a message like this while collecting tax in parallel from the same system is a contradiction to me. To start with RBI needs to sit with IT dept. And please include some CS professors.
- j0hnM1st 9y agoThis is the same federal / central bank which has banned or demonetised their own currency and killed economy.
- amrx101 9y agoAnd they still have the balls to call such childish manoeuvre as a success.
- billfruit 9y agoThe matter is not entirely clear from the article. Surely they aren't banning individuals from holding bit coins? What does regulated entities even mean: I don't think they mean bitcoin exchanges because they aren't regulated; probably it means banks.