It was announced this week that India would seek to impose some of the strictest rules on cryptocurrencies worldwide prohibiting citizens from owning, trading, transferring or mining assets such as Bitcoin and Altcoins. The move comes as cryptocurrency technology piques the interest of the financial world, Bitcoin grows significantly, and India plans to introduce its own framework for digital currencies.
But could this be the beginning of a domino-like effect, with other weaker governments and economies trying to follow suit due to the high numbers and also banning cryptocurrencies? This is why it is unlikely to be, and even if it does, it will have very little impact on the growth of the asset class.
India proposes ban on Bitcoin illegally owning, trading, mining crypt
According to officials with “direct knowledge of the plan,” India will soon introduce a bill proposing a comprehensive ban on the digital asset class, including bitcoin and altcoins such as Ethereum and others. The ban covers owning assets as well as conducting activities related to cryptocurrencies, including mining, trading, investing and more.
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The same officials familiar with the matter claim they are confident that the bill will gain sufficient support through parliament under the majority control of Prime Minister Narendra Modi. The bill would give citizens six months to liquidate assets, which in theory could affect the price increase at this stage when the offer hits the market.
The news was enough to cause a 10% correction in Bitcoin price, which hit a new record high over the weekend. However, this could also create a domino effect if other governments jointly with India ban cryptocurrencies, either because of interest in setting up their digital currencies or even fears of further growth in the sector.
Bitcoin has corrected by more than 10% from highs since the news broke | Source: BTCUSD on TradingView.com
Domino effect or adapt to the incoming king?
One of the reasons for the new bill is that India is building its own framework for a national digital currency. India is essentially wiping out competition so its currency can dominate when the time for debut comes.
Other nations are right behind them in building their own technology and could see the ongoing Bitcoin revolution as a threat as well. In such a future, a sustained sale, due to the fact that investors are forced to liquidate holdings worldwide, whether or not this bull market, the stock-to-flow model or not, could completely remove the momentum.
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However, such a future is highly unlikely. The reason for the growth of Bitcoin and other cryptocurrencies is not just digital scarcity. Bitcoin is also censorship resistant, meaning that while a government can prohibit someone from owning or using it, the government cannot seize it from a user unless it is kept in a wallet by a third party who is on it could react on behalf of the government.
If properly stored on the blockchain, India cannot take over its citizen’s BTC. Savvy users will find ways to bypass the law.
Bitcoin is down (-7%) as India takes steps to ban it. This is typical of weaker governments who see their lack of currency control as a threat to their very existence. Can’t blame them. But it won’t work …
– Ross Gerber (@GerberKawasaki) March 15, 2021
India could also be faced with the fact that it made a grave mistake when Bitcoin finally comes into its own, possibly as the next global reserve currency. All they have done is dilute their citizens from the rest of the world’s wealth and let the country go back in time.
So while a domino effect could occur, all the governments following India’s leadership here could be overthrown one by one.
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