Digital currency

Reserve Bank of India blocking banking services to cryptocurrency firms is impractical, experts say

It will only serve to deprive the country of economic benefit by forcing service providers to move abroad.

The Reserve Bank of India on Thursday issued a notification prohibiting the country’s banks and financial institutions from dealing in virtual currencies, also known as cryptocurrencies, and providing services to entities dealing in them. Such services include registering cryptocurrency service providers, maintaining their accounts, sanctioning or settling loans against virtual currencies and accepting them as collateral.

The strictures came close on the heels of senior Reserve Bank officials telling the media that the central bank was looking into the possibility of introducing a virtual currency of its own. This has led to talk that the Reserve Bank is trying to clamp down on transactions through cryptocurrencies, the most popular of which is the bitcoin, by making survival difficult for entities that enable the crypto commodity ecosystem.

But experts have called it an impractical move. “It was not a practical thing to do on part of the RBI,” said Pramod Emjay, a crypto commodity consultant. “If these companies do not get an environment conducive to growth, or even survival in this case, they will move to other countries. Several of them have already done that in the past few years. There are hundreds of such companies across the globe today. For someone who wants to engage in cryptocurrency transactions and hence use services of the cryptocurrency companies, it does not matter which country the services come from.”

Indians reportedly traded in cryptocurrencies worth around Rs 22,000 crore in the 17-month period ending December 2017, following which the Income Tax Department issued notices to more than four lakh high net-worth individuals seeking details about their sources of investment. Early this year, some of the country’s leading banks reportedly suspended accounts of bitcoin exchanges, suspecting them of carrying out “dubious transactions”.

Who is affected?

Other than the miners who generate cryptocurrencies by solving complex algorithms, the ecosystem is enabled by a range of service providers, broadly called cryptocurrency companies. They help convert one cryptocurrency into another or into fiat currency, enable the payment process within the network, provide markets for buying and selling goods and services with virtual currencies, and offer wallets in which individuals save cryptocurrencies they earn or invest in. Scores of such enterprises are registered in India, mostly in Delhi, Mumbai and Bangalore. The Reserve Bank notification has hit them all.

These companies earn by taking commissions for the services they offer. “This commission will go to other countries instead of adding to the national income here,” said Emjay.

India, like most countries, has not declared cryptocurrencies illegal, but it has not framed parameters to suggest they are legal either. Since December 2013, the Reserve Bank has issued several public notices cautioning against dealing in virtual currencies. As a result, the cryptocurrency ecosystem in India has remained somewhat of an underground enterprise.

“With this move, the RBI is pushing it further underground,” Emjay claimed. “The crypto commodity ecosystem is based on blockchain. It is inherently very transparent and reflects the entire history of every virtual coin from the point it is generated. It is certain that the ecosystem shall continue without the government’s support but what will the government do if some day in the future it needs to identify transaction trails concerning cryptocurrencies? It will definitely not be able to approach companies based abroad with equal ease.”

Blockchain is a bookkeeping platform that can be accessed by anybody on the internet but is owned by nobody. It is a decentralised digital public ledger of all cryptocurrency transactions and cannot be manipulated, unless someone owns over 50% of the entire network and invests machines more powerful than a few supercomputers taken together.

Absurd contradiction

Interestingly, while the Indian government is trying to clamp down on virtual currencies such as bitcoin, it has no qualms about blockchain technology. The Reserve Bank itself has adopted the technology for various purposes and so have governments in Andhra Pradesh, Telangana and Rajasthan, largely for land registry and property documentation.

“It is absurd on part of any government to crack down on cryptocurrency on one hand and endorse blockchain on the other,” said Pavan Duggal, a lawyer who specialises in cyber security. “The government should understand that cryptocurrency is the currency of the future and thus adopt a more holistic approach.”

In fact, Duggal added, the government should frame detailed legal parameters to clarify the issues surrounding cryptocurrency. “This measure is essential to enable India to leapfrog into using blockchain as a catalyst for growth,” he said.

Support our journalism by subscribing to Scroll+ here. We welcome your comments at letters@scroll.in.
Sponsored Content BY 

Following a mountaineer as he reaches the summit of Mount Everest

Accounts from Vikas Dimri’s second attempt reveal the immense fortitude and strength needed to summit the Everest.

Vikas Dimri made a huge attempt last year to climb the Mount Everest. Fate had other plans. Thwarted by unfavourable weather at the last minute, he came so close and yet not close enough to say he was at the top. But that did not deter him. Vikas is back on the Everest trail now, and this time he’s sharing his experiences at every leg of the journey.

The Everest journey began from the Lukla airport, known for its dicey landing conditions. It reminded him of the failed expedition, but he still moved on to Namche Bazaar - the staging point for Everest expeditions - with a positive mind. Vikas let the wisdom of the mountains guide him as he battled doubt and memories of the previous expedition. In his words, the Everest taught him that, “To conquer our personal Everest, we need to drop all our unnecessary baggage, be it physical or mental or even emotional”.

Vikas used a ‘descent for ascent’ approach to acclimatise. In this approach, mountaineers gain altitude during the day, but descend to catch some sleep. Acclimatising to such high altitudes is crucial as the lack of adequate oxygen can cause dizziness, nausea, headache and even muscle death. As Vikas prepared to scale the riskiest part of the climb - the unstable and continuously melting Khumbhu ice fall - he pondered over his journey so far.

His brother’s diagnosis of a heart condition in his youth was a wakeup call for the rather sedentary Vikas, and that is when he started focusing on his health more. For the first time in his life, he began to appreciate the power of nutrition and experimented with different diets and supplements for their health benefits. His quest for better health also motivated him to take up hiking, marathon running, squash and, eventually, a summit of the Everest.

Back in the Himalayas, after a string of sleepless nights, Vikas and his team ascended to Camp 2 (6,500m) as planned, and then descended to Base Camp for the basic luxuries - hot shower, hot lunch and essential supplements. Back up at Camp 2, the weather played spoiler again as a jet stream - a fast-flowing, narrow air current - moved right over the mountain. Wisdom from the mountains helped Vikas maintain perspective as they were required to descend 15km to Pheriche Valley. He accepted that “strength lies not merely in chasing the big dream, but also in...accepting that things could go wrong.”

At Camp 4 (8,000m), famously known as the death zone, Vikas caught a clear glimpse of the summit – his dream standing rather tall in front of him.

It was the 18th of May 2018 and Vikas finally reached the top. The top of his Everest…the top of Mount Everest!

Watch the video below to see actual moments from Vikas’ climb.

Play

Vikas credits his strength to dedication, exercise and a healthy diet. He credits dietary supplements for helping him sustain himself in the inhuman conditions on Mount Everest. On heights like these where the oxygen supply drops to 1/3rd the levels on the ground, the body requires 3 times the regular blood volume to pump the requisite amount of oxygen. He, thus, doesn’t embark on an expedition without double checking his supplements and uses Livogen as an aid to maintain adequate amounts of iron in his blood.

Livogen is proud to have supported Vikas Dimri on his ambitious quest and salutes his spirit. To read more about the benefits of iron, see here. To read Vikas Dimri’s account of his expedition, click here.

This article was produced by the Scroll marketing team on behalf of Livogen and not by the Scroll editorial team.