"In the 1970s and 80s, at the height of what was known as the License Raj, Indians could only hold foreign currency for a specific purpose and with a permit from the central bank. If a businessman bought foreign exchange to spend over two days in Paris and one in Frankfurt, and instead spent two days in Germany, the Reserve Bank of India would demand to know why he’d deviated from the currency permit. Violators were routinely threatened with fines and jail time of up to seven years.
Imports required additional permits. Infosys Ltd. founder Narayana Murthy recalls spending about $25,000 (including bribes) to make 50 trips to Delhi over three years, just to get permission to import a $150,000 computer. Plus, since any foreign exchange that the company earned notionally belonged to the government, the RBI would release only half of Infosys’s earnings for the firm to spend on business expenses abroad.
Naturally a black market, with all its unsavory elements, emerged for foreign currency. The government doubled down, subjecting those dealing in illicit foreign exchange to preventative detention, usually reserved for terrorists. Businessmen selling Nike shoes and Sony stereos were arrested as smugglers.
...
The system impoverished Indians and made it impossible for Indian firms to compete globally. There’s a reason the country’s world-class IT sector took off only after a balance of payments crisis forced India to open up its economy in 1991.
While details of the possible crypto ban remain unclear, a draft bill from 2019 bears eerie resemblance to the 1970s controls. It would criminalize the possession, mining, trading or transferring of cryptocurrency assets. Offenders could face up to ten years in jail as well as fines.
Such a blanket prohibition would be foolish on multiple levels. For one thing, enforcing the law would be even more difficult than under the License Raj. Raids once aimed at seizing dollars and gold bars would face the challenge of locating a password or seed phrase holding millions in Bitcoin. Nor can the government seize or even access the network of computers scattered across the world mining cryptocurrency and maintaining blockchain ledgers.
To enforce a ban, authorities would have to develop an intrusive surveillance system that could track all digital and internet activity in the country. Thankfully, India does not have the state capacity to pull that off. More likely, its efforts will only drive the cryptocurrency market underground.
That would almost certainly give rise — again — to an ever-evolving set of arbitrary rules imposed by the central bank and tax department, optimized mostly to extort bribes. Young coders and start-up founders would face harsh and arbitrary raids. Unlike the “smugglers” of the 1970s, some of India’s most elite and entrepreneurial workers are engaged in these new financial technologies; persecution could spur a brain drain.
Ordinary Indians would be deprived of the very real benefits of cryptocurrency. The ban would prevent Indians from capitalizing on crypto-asset appreciation, which blockchain evangelist Balaji Srinivasan has called a “trillion-dollar mistake.” India receives the highest inflow of global remittances and using blockchain networks could save Indians billions in transfer fees. Meanwhile, elite Indians with options will flee the country, taking their wealth and innovations with them.
And none of this will address the government’s real fear: tax evasion. Granted, unlike gold bars and dollars under the mattress, cryptocurrency is hard if not impossible to track."
https://www.bloomberg.com/opinion/articles/2021-03-19/bitcoin-ban-proposed-in-india-is-a-bad-idea
Imports required additional permits. Infosys Ltd. founder Narayana Murthy recalls spending about $25,000 (including bribes) to make 50 trips to Delhi over three years, just to get permission to import a $150,000 computer. Plus, since any foreign exchange that the company earned notionally belonged to the government, the RBI would release only half of Infosys’s earnings for the firm to spend on business expenses abroad.
Naturally a black market, with all its unsavory elements, emerged for foreign currency. The government doubled down, subjecting those dealing in illicit foreign exchange to preventative detention, usually reserved for terrorists. Businessmen selling Nike shoes and Sony stereos were arrested as smugglers.
...
The system impoverished Indians and made it impossible for Indian firms to compete globally. There’s a reason the country’s world-class IT sector took off only after a balance of payments crisis forced India to open up its economy in 1991.
While details of the possible crypto ban remain unclear, a draft bill from 2019 bears eerie resemblance to the 1970s controls. It would criminalize the possession, mining, trading or transferring of cryptocurrency assets. Offenders could face up to ten years in jail as well as fines.
Such a blanket prohibition would be foolish on multiple levels. For one thing, enforcing the law would be even more difficult than under the License Raj. Raids once aimed at seizing dollars and gold bars would face the challenge of locating a password or seed phrase holding millions in Bitcoin. Nor can the government seize or even access the network of computers scattered across the world mining cryptocurrency and maintaining blockchain ledgers.
To enforce a ban, authorities would have to develop an intrusive surveillance system that could track all digital and internet activity in the country. Thankfully, India does not have the state capacity to pull that off. More likely, its efforts will only drive the cryptocurrency market underground.
That would almost certainly give rise — again — to an ever-evolving set of arbitrary rules imposed by the central bank and tax department, optimized mostly to extort bribes. Young coders and start-up founders would face harsh and arbitrary raids. Unlike the “smugglers” of the 1970s, some of India’s most elite and entrepreneurial workers are engaged in these new financial technologies; persecution could spur a brain drain.
Ordinary Indians would be deprived of the very real benefits of cryptocurrency. The ban would prevent Indians from capitalizing on crypto-asset appreciation, which blockchain evangelist Balaji Srinivasan has called a “trillion-dollar mistake.” India receives the highest inflow of global remittances and using blockchain networks could save Indians billions in transfer fees. Meanwhile, elite Indians with options will flee the country, taking their wealth and innovations with them.
And none of this will address the government’s real fear: tax evasion. Granted, unlike gold bars and dollars under the mattress, cryptocurrency is hard if not impossible to track."
https://www.bloomberg.com/opinion/articles/2021-03-19/bitcoin-ban-proposed-in-india-is-a-bad-idea