An overarching ban on private cryptocurrencies in India might prompt large investors to take their business underground, industry experts said.

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 to prohibit private cryptocurrencies is scheduled to be tabled in the ongoing budget session of Parliament. “The fact is, crypto runs on the internet. The control does not rest with one person, one organization, or one country. Hence, it is not possible to ban crypto trading,” said Kumar Gaurav, founder and chief executive of online banking platform Cashaa.

Gaurav added the government can ban the “legitimate use of crypto”, which will eventually lead to international trading or the rise of the black market in India. “People might still trade but it will become difficult to track within the country.”

“When the banking ban came in the last time, people were stuck. Exchanges were asking people to withdraw their money, but investors were holding on, hoping to take their assets offshore,” an industry executive said, requesting anonymity. He was referring to the Reserve Bank of India’s (RBI) ban on cryptocurrencies, which was later quashed by the Supreme Court in March 2020.

News reports said the government will give 90 days or more for people to sell their crypto assets, but this may not be feasible either.

According to executives from two top cryptocurrency exchanges in India, the ban would create an environment where there are many sellers but no buyers. This will further drive people towards underground markets, or to take their money offshore.

The industry professional quoted above said crypto exchanges had hundreds of crores of rupees stuck in bank accounts when a ban was enforced last time. “There is a chance that people will move offshore, to foreign exchanges.”

“There’s a large possibility (of underground markets rising),” said Nischal Shetty, founder of WazirX, the largest crypto exchange in the world.

Shetty said exchanges have existed in India for about five years now, whereas bitcoin is over 10 years old, and there is no way to get data on the wealth created by investing in crypto before these centralized entities came in. “All the liquidity of buying and selling cryptocurrencies in early days would have been in the unregulated markets, off the books.”

Experts hope that the Centre will try and regulate the industry instead of imposing an outright ban. “Government should consider regulating the sector. That would be good for the country, industry, customers and the government,” said Gaurav Chopra, executive director, Payments Council of India. “Cryptocurrency exchanges have already signed a code of conduct and we have sent a copy of the same to certain people in the government.”

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