RBI’s ban on cryptos was lifted by an SC order on the grounds of proportionality. The doctrine of proportionality entails that any public authority must maintain a sense of proportion between the goal it wants to achieve and the means it employs to achieve it. RBI could have employed ‘alternate or less intrusive measures’. The crypto regulation bill could also be challenged if it bans the cryptos. Besides there is no clear definition of what constitutes a private crypto. Bitcoin and Ethereum could be considered public cryptos as they are based on open blockchain. Cryptos could be used for money laundering or terror financing. However, could it be proved that most usage of cryptos is for such activities? It is also not necessary to assume that for value transfer, only the fiat currency is the option. Even gold is used for value transfer. As far as the anonymity is concerned, it could be said blockchain analysis could lead to deanomysing.

Under article 19, there is a right to trade in cryptos. There is a right to property if cryptos are accepted as assets. Under article 14 of equality, there cannot be an arbitrary decision by the government. Its encryption software source code is protected by the First Amendment in the US. Though reasonable restrictions can be placed, there could not be disproportionate.

Bitcoin reached a new peak of $50000 and then had fallen back in February 2021. As we have observed, Bitcoin attracted investment from Tesla, and interest from Morgan Stanley, BNY Mellon, MasterCard. There is a serious debate about whether Bitcoin is a legitimate asset with purpose and value. There are misgivings about its use in money laundering and spurious transactions. Taleb has divested the Bitcoin held. According to him, a currency can never be more volatile than what you buy and sell with it. Products cannot be priced in the cryptos. More investors could dabble into Bitcoin trade.

In 2017 too there was a run up, but now there is trust that Bitcoin will emerge as mainstream asset class with the backing of big investors.

Bitcoin market could have a limited fixed supply of 21 million coins.

Blockchain India is a pan-India blockchain community consisting of 30000 plus blockchain practitioners. It was affected adversely in 2018 because of the crypto ban, but were part of the crypto revival due to SC in 2020. These experts are likely to migrate to crypto friendly countries such as Switzerland, Singapore, Estonia, and the US. Blockchain innovation is beneficial in many sectors of the economy. Crypto assets could have financed the growth of blockchain company.

Crypto exchanges and investors may migrate too. There could be a brain drain and capital drain. International exchanges could shelve the plans to enter India. International investment in crypto exchanges is likely to decline.

Ban could be ineffective and could generate a crypto black market.

If crypto eco-system is disturbed, there are going to be huge economic issues. As some advanced economies have accepted cryptos with suitable regulation, India could be at a disadvantage. Bitcoin is likely to emerge as a global reserve currency. Here too India could suffer.

Developed economies are inclined to grant legal status to cryptos. They are working on regulatory frameworks.

Dorsey from Twitter and Corey Carter ( Jay Z), a rapper-businessman have come together to form BTrust which is an endowment of 500 Bitcoin (worth $2.5 million). It is designed as a blind, irrevocable trust. They are seeking 3 board members to start the endowment. BTrust has one mission — to make Bitcoin the Internet’s currency. To begin with , it will focus on Africa and India. This move comes after Tesla’s decision to invest in Bitcoin. MasterCard and PayPal too are in this game. India and China intend to have their own digital currency.

Cryptocurrency is created or mined in a decentralised fashion. It will hit a finite maximum number of tokens due to its mining algorithm.

Cryptos are insecure. You lose the investment if you lose the private key.

The exchange rate is based on sentiments, rather than economic rationale.

Mining cryptos consume huge amount of electricity. It can affect the climate.

All this points to the need for banning it. Still there are reasons not to do so.

Rational individuals must be free to invest their money where they want, unless their investment harms others.

Blockchain technology and its underlying cryptocurrency is a useful technology. It has potential uses in other areas.

We Indians will be barred from the benefits of the rise in cryptos value.

Low cost cross-border remittances are possible by the distributed ledger system.

Cryptos can be pegged to a basket of regular currencies to settle international payments.

MasterCard proposes to allow its cardholders to transact in specific cryptocurrencies on its network. To this end. MasterCard is engaged with central banks the world over since they are likely to launch official cryptocurrencies. MasterCard has already collaborated with Wirex and BillPay — the big cryptocurrency firms — to convert the cryptos into fiat currencies. MasterCard focuses on stablecoins which peg their value to another asset, e.g. US dollar.

The Government in India proposes to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the budget session. It is to be seen whether it bans holding and/or trading crypto assets in India. It is to be seen whether the law will apply to Indians holding crypto assets anywhere.

It is estimated that some 7 million Indians hold crypto assets worth over $1 billion. These investors are likely to move their crypto assets to bitcoin-friendly countries such as Singapore and Malta. These assets can be picked up by the traders in the US, Europe and China. A large sale could depress the prices too.

Indian crypto exchanges have subsidiaries abroad where such assets can be transferred. But if the ban extends to holding anywhere, the situation would be difficult.

Some exchanges can operate on the lines of fund of funds. Here the investors would not hold the cryptos directly.

There could be legal issues. If the proposed legislation bans private cryptos, the issue is none of the cryptos can be called private assets as they do not have an owner or issuer. India should not miss on the Fourth Industrial Revolution in which the crypto assets are an integral part. In fact, a central bank sponsored currency is more private than public currency such as Bitcoin.