India's Reserve Bank deputy governor calls for crypto ban
- Reference: 1644991087
- News link: https://www.theregister.co.uk/2022/02/16/india_cryptocurrency_ban_call/
- Source link:
Speaking at the Indian Banks' Association's 17th Annual Banking Technology Conference, Sankar argued that cryptocurrencies are poorly named, as unlike fiat currencies they "do not have an issuer, they are not an instrument of debt, nor commodities, nor do they have any intrinsic value."
He also dismissed cryptocurrencies as a financial asset, arguing that "financial assets have underlying cash flows and need to be some person's liability." Cryptocurrencies have neither cashflow and create no liability.
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His argument that crypto-bucks are not commodities was based on grounds that commodities "are tangible and have utility." Sankar said cryptocurrencies meet neither criterion.
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The deputy governor eventually settled on a definition of cryptocurrencies: "very much like a speculative or gambling contract working like a Ponzi scheme."
Cryptos threaten financial sovereignty and make a country susceptible to strategic manipulation by private corporates
Sankar even said he'd prefer a Ponzi scheme to cryptocurrency, as the former at least invests in income-earning assets.
A Bitcoin, by contrast, "is akin to a zero-coupon perpetual; it's like you paid money to buy a bond which pays no interest and which will never pay back the principal. A bond with similar cash flows would be valued at zero, which, in fact, can be argued as the fundamental value of a cryptocurrency."
With that excoriation out of the way, Sankar got to his main point: cryptocurrencies are designed to evade government control, are therefore effectively private currencies, and private currencies are never stable and seldom endure.
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India, he argued, is therefore better off not tolerating cryptocurrencies – and especially stablecoins, which he labelled as potentially more dangerous because they would be more stable but still end badly.
That seems contradictory, but Sankar believes that any private currency will displace India's Rupee "to some extent." While advanced economies may be able to endure cryptocurrency-driven disruptions to their economies, the deputy governor said India lacks the consumer protection and regulatory frameworks to do so. India has also worked hard in recent years to broaden its tax base, make paying tax more culturally acceptable, and [5]increase compliance with tax laws .
Bans of cryptocurrencies may therefore look like an overreaction in some nations, but in India are advisable and even necessary. In Sankar's view, the tokens will "wreck the currency system, the monetary authority, the banking system, and in general government's ability to control the economy."
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"They threaten the financial sovereignty of a country and make it susceptible to strategic manipulation by private corporates creating these currencies or Governments that control them. All these factors lead to the conclusion that banning cryptocurrency is perhaps the most advisable choice open to India."
[7]India says: Xiaomi the $88m in missing import taxes, please
[8]India backs away from digital services tax after US pressure
[9]Indian government floats idea of home-grown challenger for Android and iOS
[10]India to ban private cryptocurrency, create official version instead
Sankar added that the Reserve Bank has considered regulations, but "found that none of them stand up to basic scrutiny."
The deputy governor's remarks are at odds with current Indian policy, announced [11]earlier this month , that calls for a tax on cryptocurrency transactions and another – at double the rate of India's capital gains tax - on profits generated by trading in cryptocurrency. India will also create its own digital rupee.
Sankar suggested those currently invested in cryptocurrency could be provided with a "reasonable exit" to cushion then from any losses if a ban were imposed.
He also took on the argument that a crypto ban would be ineffective.
"One might as well argue that drug trafficking is a rampant phenomenon despite a ban, and therefore drug trafficking should be legalised and regulated," he said. "If cryptocurrencies are banned, the vast majority of investors who are law abiding would desist from investing. Those few elements who would continue to invest will essentially be carrying out an illegal activity. Such exceptions should reinforce the need for a ban, rather than invalidate it." ®
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[5] https://www.theregister.com/2020/08/14/india_honoring_the_honest_tax_scheme/
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[7] https://www.theregister.com/2022/01/07/xiaomi_88m_india_taxes/
[8] https://www.theregister.com/2021/11/26/india_equalisation_levy_windback/
[9] https://www.theregister.com/2022/01/27/india_ponders_indigenous_mobile_os/
[10] https://www.theregister.com/2021/11/24/india_digital_currency_bill/
[11] https://www.theregister.com/2022/02/02/india_budget_2022/
[12] https://whitepapers.theregister.com/
He nails it in one!
A digital Ponzi scam with zero redeeming features.
Ban it from being legal tender, don't accept it for any governmental transaction (like paying your motor vehicle registration, mailing a letter, paying taxes, etc), and say that private companies can issue/accept it if they want to, but can neither require their customers to use it nor penalize those customers that refuse to do so.
"Would you like to pay in StarBuckCoin for a 10% discount?" style crap would be illegal, and you would run the risk of having the government come down on your head like a ton of bricks.
CryptoCurrencies: Just Say No.
his boss said: "no underlying asset -- not even a tulip"
that tulip snark was absolutely awesome!
that really made my day last week
indeed, these guys get it!
Central banks rightly fear Bitcoin. It solved the Byzantine Generals problem which removed the need for a trusted 3rd party. Friedrich Hayek wrote in the 1970s about the need denationalisation of money.
It provides an escape from a failing fiat currency. Why should money just be the preserve of Governments to maniplulate at will? And why do many people accept without question that inflation should be 2%? In other words our money must always lose buying power. Money represents time and inflation theft of time.
Wooosh !
A Suboptimal Analogy
"One might as well argue that drug trafficking is a rampant phenomenon despite a ban, and therefore drug trafficking should be legalised and regulated," he said.
He should have used human trafficking, or illegal gambling, or some other illegal but still not stamped out activity as a justification for maintaining a law which you know will still be broken.
Drug trafficking is the result of the drugs being criminalized. Making drugs harder to obtain increases their value, creating a highly profitable market for drug merchants. Drug use is caused more by despair than by the physically addictive nature of the drugs. People use them for recreation but mostly to escape their misery, and their misery is often the result of poverty caused by underlying economic issues. Putting people in prison doesn't make them less miserable, and the threat of it doesn't sufficiently deter them from using drugs to escape reality. It does however, fuel the prison-industrial complex, another profitable market.
Sherlock the tobacco in his pipe is a drug.
The best way to combat drug use is by decriminalizing drugs, provide counseling, and provide social services to address economic issues. People ween themselves off of their drug habits when their lives improve.
God bless T Rabi Sankar
At last, somebody who comes out and tells it as it is.
Ban it and be done with it.
They fear it because they can't control it. They hate us for our freedom.
The nub of the matter:
"cryptocurrencies are designed to evade government control"
There you have it, the real reasons governments don't like cryptocurrencies is that they can't control them. And big banks, as in the forum he was speaking to, don't like them because they cut thee banks / middlemen out of financial transactions. If people can lend money to each other directly, how do banks make money?
Many of the points he mentions can fairly be raised against some cryptocurrencies, but not all. For example bitcoin isn't 'backed' by any government, but is backed by the faith of hundreds of millions of users, which is more than most countries have citizens. That means that it works as a store of value. Other cryptocurrencies can be lent out, giving the lender far more interest than they would get in lending it through their banks. This is again why big banks and central banks are opposed to what they call 'private' (but are actually public) cryptocurrencies but quite in favour of creating their own truly private (i.e controlled by them) cryptocurrencies.
There are at recent count 800-1000 cryptocurrencies, and it's probably fair to say a good few of them are absolutely speculative Ponzi schemes, that doesn't mean they all are.
"a luxury only advanced economies can afford"
Even advanced economies can't afford this nonsense