
India’s Central Bank Bans Regulated Entities From Dealing In Virtual Currencies - abhi3
https://www.bloombergquint.com/business/2018/04/05/rbi-bans-regulated-entities-from-dealing-with-virtual-currencies
======
sremani
Well, hind-sight is 20-20 but let me post-rationalize.

India's biggest problem is unofficial economy and low tax base, and is trying
to expand tax base and trying to get more and more people into formal economy.
Cryptocurrencies are not really tax-base expansion friendly even if regulated.
So this makes sense from the point of view.

The interesting part here is Government of Andhra Pradesh is a member of
Ethereum Enterprise Alliance, so now how are New Delhi and "Amaravati" going
to deal with this situation would be interesting.

~~~
starving_coder
With the alliance, Govt of AP is primarily aiming at integrating blockchain
tech in to governance and that's that. Their vision is still perfectly aligned
with RBI guidelines and will perfectly act as a case study for the rest of the
states to follow should things fall in place. Not sure what "situation" are
you hinting at.

~~~
deft
People don't understand the EEA. They think it means "these partners will use
the publicly traded ETH asset"

------
thisisit
India has strict laws on tender or cash. Personal foreign currency holdings
are severely restricted. So, this doesn't come as a surprise at all.

That said,

> The regulator, however, decided that it will promote the use of blockchain –
> a public ledger that serves as the backbone of bitcoin – in financial
> services for strengthening transparency and improving inclusion.

As reported earlier, Wall Street is already cooling down on the blockchain
hype:

[https://www.reuters.com/article/us-banks-fintech-
blockchain/...](https://www.reuters.com/article/us-banks-fintech-
blockchain/wall-street-rethinks-blockchain-projects-as-euphoria-meets-reality-
idUSKBN1H32GO)

So, what plans does the RBI have for blockchain?

~~~
JumpCrisscross
> _what plans does the RBI have for blockchain?_

Same ones my buddy at State Street did: say “blockchain” to a superior to get
budget for long-needed database (and other back office) upgrades.

~~~
artmageddon
So _that 's_ what I should've done while I was there so we could've gotten a
legit database to handle our yield curves processing! We were expected to do
everything in Excel, and if we were lucky, MS Access :|

------
HarryHirsch
Well, yes. The Albanian Lotto Riots of 1997 are still remembered, many
Albanians lost their shirts over it. People made money through the free
markets after the fall of communism, but there wasn't much of a banking system
yet or experience with investments, so Ponzi schemers jumped in to fill that
need. When these schemes failed, there was rioting that the police and
military suppressed only half-heartedly ( _they_ had lost hard-earned money
themselves), so local gangsters took it on themselves to restore order and
became warlords in the process. If this sounds like a big mess, it was.
English Wikipedia even calls it a civil war:
[https://en.wikipedia.org/wiki/Albanian_Civil_War](https://en.wikipedia.org/wiki/Albanian_Civil_War)

~~~
mercer
Whatever word is appropriate, it was basically a complete disappearance or the
rule of law. Basically, imagine all the police and military disappearing
instantly, in a country that was already quite corrupt and infantilised by
communism (not that I'm sure a more 'civilized' country would do any better
under the circumstances).

~~~
mercer
I don't usually do this, but I'm very curious why this might warrant
downvotes?

------
firasd
The sad thing is that while the Indian government has all these regulations to
prevent you from holding $2,000 of Bitcoin, or goes on adventures like
demonetization disaster which affect ordinary working people, giant scams and
irregularities (like Nirav Modi getting away with billions, or prominent
citizens being named in the Panama papers) are business as usual.

~~~
mx92je082
A few tweaks to the phrasing and you’ve basically described all nation state
behavior and the entire history of human attempts at “society”.

Power brokers control the activity and discourse of the populace. Ignore the
rules for personal enrichment (the US Congress and others pass rules for us [
banning insider trading] but not them).

This isn’t just an India thing

~~~
m_alexgr
Very true, most assuredly not just an India thing.(although perhaps India is a
well known example)

The basic premise, stated another way, is that power tends to corrupt.

------
dmix
Anyone who want's some insight/context into India's economic regulatory
environment from which these controls came from should watch this (2 part)
video:

[https://www.youtube.com/watch?v=hVwIZzGHxwc](https://www.youtube.com/watch?v=hVwIZzGHxwc)

There's a crazy amount of regulation and paperwork for even the most benign
business. And much of it differs as you go between the different areas, so
businesses that have to say transport goods from Mumbai to New Delhi may have
to stop 4-5 times to fill out each regions regulatory paperwork.

It's really not surprising to such a top-heavy state being wary of something
which seems like it can't be as easily controlled top-down. Which we saw with
the "banning" of those paper bills - which had a significant negative impact
on the economy, as much of the economy manages to function _in spite_ of those
rules, large by side stepping them.

India will never catch up to China's growth unless they clean up this mess.
And even beyond growth, it benefits no one to have so many businesses feel the
_need_ to completely bypass all the rules because they are so bad ones in
between the good.

~~~
Karishma123
Indian here.

India's regulation love is mind-boggling and matched only by Venezuella or
North Korea. Only difference being that people beat the system no matter what.

My family decided to start a fully self-funded private school in 2004. Here
are the steps.

1\. First we need to get NOC from the local government which we will get only
if we show the land, building etc. Most important factor in NOC is "need". So
we need to show paperwork that there are not enough schools nearby for the
projection of new students over 10 years and all that.

Clearly, you can't argue that "my school would be better". (We paid $10k as
bribe to get this)

2\. There is lot of regulation related to teacher's salaries and
qualification, teacher-student ratio etc. Fee regulation etc. but relatively
easier to get with very less bribe.

3\. Right to Education Law (RTE) kicks in.

We have to do tremendous amount of paper work and give 25% of our seats to
government for free which the government allocates based on complex lottery
that uses caste/income etc. Given that our school caters to lower middle class
a plumbers kid is paying to subsidise education of electrician's son because
the former did not win the RTE lottery.

We have to increase fees of remaining 75% students to cover the expenditure on
these 25%.

The government promised a small money per seat by law. However for last 4
years we have not got a penny. The amount is any ways very little.

But then RTE has various other provisions and the violation of that results
into withdrawal of NOC, closure of school and criminal proceeding against the
principal/management.

Here are some of the provisions: \- There should be X toilets per 100
students. \- You can not dismiss any student for any reason. (not just 25% RTE
students but all 100% students) \- You can not set any admission criteria what
so ever. No tests, interviews, family background nothing. Pure lottery only.
(For the 75% students)

Most parents know this and will simply refuse to pay fees after we give
admission to their kids. All we can do is to beg.

4\. There is 100% exemption to any school that is run by management whose
members are Christians, Muslims, Buddhists, Jain or Sikh. (which means RTE
applies to your school only if the management is Hindu or Jewish)

5\. RTE resulted into closure of thousands of schools in India and mushrooming
of Church run schools.

My family closed the school in 2016. There are various court cases still going
around this.

~~~
AareyBaba
Re 4: Article 30 in The Constitution Of India 1949 30\. Right of minorities to
establish and administer educational institutions (1) All minorities, whether
based on religion or language, shall have the right to establish and
administer educational institutions of their choice.

This was put in the constitution as a guarantee to linguistic and religious
minorities that they could maintain their identity within the vast majority.
This was in liu of the more unpalatable option of providing special
representation in Parliament for each minority group. In subsequent years
after independence the Supreme Court clarified that the minority status would
be determined by state. So presumably, you could set up a school in Mizoram if
you are a Hindu. Or a Hindi language school in Tamil Nadu. If I am not
mistaken, Sindhis run their own colleges in Mumbai under these minority
rights.

~~~
Karishma1234
Yes. Indian constitution discriminates based on religion when it comes to
running schools and other edu institutions.

Article 30 gives special rights to christians and muslims and subsequent
amendment 93 also gives right to occupation to minorities but not to Hindus
and Jews. RTE was deemed unconstitutional even in the light of Article 30 in
TMA Pai vs State of Karnataka thus giving rise to 93rd ammendment.

> If I am not mistaken, Sindhis run their own colleges in Mumbai under these
> minority rights.

You are most certainly mistaken.

States can only declare linguistic minorities. Religious minorities are
determined by a body called NCMEI. NCMEI by law can not have a Hindu as its
member as a result a body that comprises of Muslims and Christians gets to
decide if a Hindu school in Mizoram can start a school and avail minority
benefits. They have categorically refused to do so in Kashmir, Nagaland and in
Kerala so far.

------
lumberjack
Not unexpected. China might follow suit too. Developing countries who are
experiencing capital flight will want to close the cryptocurrency loophole.
For the same reasons, our governments are unlikely to want to chase away the
golden goose.

~~~
hackme1234
Does China even have official exchanges?

Binance works from Hong Kong afaik.

~~~
lumberjack
The exchanges are not essential for capital flight. What China needs to ban,
is Bitcoin mining, which does happen on the mainland.

------
runewell
Blockchain without decentralization isn't that exciting. The problem with
banning crypto is that there will be an entrepreneurial group of people
willing to accept cryptocurrencies for a high fee and turn it into fiat or a
commodity in a neighboring country. As someone developing in the crypto space,
I look at this tech as the formation of a global, secure, always-on, always-
accessible, standardized, permission-less database. When people talk of "the
cloud" I feel that crypto platforms fit that description more aptly then
traditional services.

~~~
ateevchopra
"Blockchain without decentralization" is just plain database. Truly said, it's
nothing exciting.

~~~
tluyben2
Well, it's even worse than not exciting; it's very slow database, so not the
benefits of blockchain and not the benefits of modern dbs.

------
harichinnan
Since the BJP government took power, India has had multiple faux pas from the
central government front. They swapped out Raghuram Rajan with a no name yes
man as the governor for central bank. Then they did demonetization, a quixotic
adventure at getting rid of black money by making all legal tender obsolete on
one fine morning. This caused deaths amongst people standing in queues in
front of ATMs. They couldn't print the new money fast enough. To protect the
new money from being used in black market, the party spread a rumor about some
advanced tech embedded in currency to make it easy to track from satellites.
This is demonetization 2.0 and would permanently damage all progress Indian
startups made in FinTech space.

~~~
shripadk
Same Raghuram Rajan knew about the massive PNB bank scam and did nothing?

------
kylehotchkiss
I'm surprised they waited so long. But decision meshes well with the
government push for government-approved (UPI?) digital payments, all with
pretty strict KYC policies.

------
kang
Indian governance is a mess right now. A govt sending a message like this
while collecting tax in parallel from the same system is a contradiction to
me.

To start with RBI needs to sit with IT dept. And please include some CS
professors.

------
captn3m0
>Accordingly, the RBI has constituted an interdepartmental committee that will
submit a report on the feasibility of a fiat digital currency. The committee
will submit its report by June-end.

Man, I really hope they consider Taler. No blockchain bullshit, but it would
be really nice to have a privacy-first digital currency launched in .in

~~~
CryptoPunk
I've said this before but it bears repeating: GNU Taler wants to give the
government a backdoor. That's privacy in the same way the Clipper chip in the
1990s was privacy.

------
billfruit
The matter is not entirely clear from the article. Surely they aren't banning
individuals from holding bit coins? What does regulated entities even mean: I
don't think they mean bitcoin exchanges because they aren't regulated;
probably it means banks.

------
flowctrl
Another positive step in the demise of the traditional banking system.

------
j0hnM1st
This is the same federal / central bank which has banned or demonetised their
own currency and killed economy.

~~~
amrx101
And they still have the balls to call such childish manoeuvre as a success.

------
onecooldev24
Eventually Bitcoin or the fiat currency goes to zero. I think Indian
politicians made the wrong choice.

~~~
hndamien
Zero! That is extremely wishful thinking. Even as a historical artefact
Bitcoin will never go to $0. Hell, Bitconnect is still trading at $0.69 with
$13,000 volume today. I really hope this is wash trading.

~~~
elevenoh
Bitcoin will be a multi-decade artifact at minimum. A novel collectable.

~~~
onecooldev24
No fiat currency will go to zero.

~~~
hndamien
Not 0 due to the cost of printing, but 4.2 trillion Marks to $1 USD in Weimar
Germany 1923 is pretty close. Given that they aren’t in circulation now, I
think we can assume at least some period of 0.

------
cvaidya1986
Early adopters to the blockchain and crypto market will position themselves
favorably in ten years.

------
craigc
The irony of all these banks and governments banning crypto currency purchases
is that all they are doing is strengthening the use case for crypto currencies
to begin with. One of the most appealing things about crypto currencies
(specifically decentralized ones) is that you are free to hold them and use
them however you like.

There aren’t restrictions on who you can send them to, what time of the day
you can send them, the maximum amount you can send. You don’t have to worry
about your bank account being frozen or suspended. You don’t have to wait days
for transactions to go through. You don’t need a bank account at all to store
them. The more that banks restrict the way people are allowed to use their
money, the more it will push people into crypto currencies.

State backed crypto currencies are unlikely to succeed in the same way that
decentralized ones like Bitcoin are because central control allows the bank or
government to print as much as they would like and alter transactions however
they see fit. It’s unlikely there will be any sort of public ledger/blockchain
or accountability. Eventually people will catch on to this and figure out a
way to move back to Bitcoin and others. It may take 10-20 years or longer, but
I don’t think this charade is going to last forever.

In addition, I am always wary when banks do things like this citing reasons
like: “Our goal is to protect our customers. It’s too volatile. It’s used for
money laundering.” Banks have never and will never care about their customers.
In fact, they benefit from their customers going into debt (credit card fees,
loan interest, overdraft fees, etc). How concerned were the banks about
issuing loans to customers leading up to the 2008 housing crisis? Money
laundering is still primarily done using cash and often with banks turning a
blind eye.

This is all about banks understanding the threat of crypto currencies and
trying to maintain control of the financial system by eliminating any and all
competition. They know that widespread crypto adoption will make them
obsolete. I think this battle will go on for years, but I think eventually the
banks are going to lose. It’s possible that they already know that too.

~~~
skybrian
For people to be "pushed" into cryptocurrency they need to encounter a
situation where they want to do a financial transaction and their usual
payment systems don't work. How likely do you think that is?

~~~
craigc
I disagree with that. For people to be pushed into cryptocurrency, it has a
lot more to do with debt and inflation and problems with fiat currencies. I
didn’t mention that in my original post because I wanted to focus more on the
technology aspects, but I believe the monetary aspects will be the real
catalyst that ultimately causes adoption.

The fact is, if you hold your savings in USD in a bank account with close to
zero interest rates, your life savings will be worth less every single year
(purchasing power, not dollar amount). With a deflationary currency such as
gold or bitcoin, that is not the case. I think as people realize this, it will
eventually become a self fulfilling prophecy where people are pushed into
cryptocurrencies as a hedge against hyperinflation (it is already happening in
certain countries such as Venezuela).

It stands to throw off the entire balance of power in the world which is why
people in high places are trying to slow it down and prevent it from
happening, but I believe it is just putting off the inevitable. That is why I
am saying it wont happen today. I said 10 to 20 years as an aggressive
estimate, but in reality it could take 50 to 100 years.

I also believe the entire surge in Bitcoin and crypto and subsequent crash may
have been orchestrated by big players in order to shake the public’s
confidence and trust in these markets to push adoption farther down the road.

~~~
notahacker
Bitcoin is not "deflationary". It's lost roughly the same amount of purchasing
power since around Christmas as the USD has in my lifetime.

The difference between the USD and BTC isn't that one loses value every single
year and the other doesn't. It's that one is actively managed to ensure it
retains ~98% of its purchasing power over the course of the year and the other
isn't.

That 2% fall really isn't such a huge deal for people that want instant access
to the only money their creditors are required to accept, the only money they
can pay their taxes in and the only money that's widely accepted elsewhere.
(Other assets might actually gain purchasing power more often than not, but
can also fall _relative_ to that impending tax bill)

Most of the world's wealth is stored in assets which are not money or bank
accounts anyway. And if people want to hold _all_ their savings in something
with a better return than their bank account, then bonds and stocks have been
around, fungible and convertible to cash via apps for a very long time and
payment app-ized versions of those are a far more plausible alternative to
traditional banking for the average person than intrinsically worthless
cryptographic signatures "mined" in China and shilled for on forums. The only
thing unique about cryptocurrency as an economic asset is that it has no legal
tender status and zero income stream, rights or assets attached to it. There
might have been people orchestrating surges and crashes, but that's pretty
much the _best_ case scenario for assets which people have no reason to value
at all.

~~~
craigc
Clearly my opinion is quite unpopular. I am fine with that. If you gave me
$10,000 today and gave me the option to put that money anywhere: Stocks,
Bonds, Savings, Gold, Silver, etc. I would choose Bitcoin 10 times out of 10.

Yes, Bitcoin has lost a lot of value since Christmas, but it is still up
around 600% from last year. I am taking a long term view here. It is unfair to
criticize Bitcoin’s decline because in terms of an asset class it is still
miniscule. I consider it in the early price discovery days. Amazon stock
declined from $107 to $7 around 2000-2001 so you could make the same argument
that buying Amazon was a bad investment then, but you would look pretty dumb
today. For reference, just last year, Bitcoin’s market cap was around $15
billion. That would be the equivalent of buying Amazon at around $32 based on
the current price.

The Bitcoin volatility will stabilize over time, and I think it will become a
legitimate asset class. I would like to ask you in response to

> There might have been people orchestrating surges and crashes, but that's
> pretty much the best case scenario for assets which people have no reason to
> value at all.

Why would you say that fiat currencies have value (other than because the
government says so)?

~~~
notahacker
> Why would you say that fiat currencies have value (other than because the
> government says so)?

This is a good question. Two reasons. Firstly there are many people who _must_
obtain dollars in future to repay debts (all new dollars are created as
someone's debt) or to pay taxes of around a quarter of GDP per annum.
Secondly, central banks actively intervene to decrease supply when purchasing
power drops faster than they desire. Since people _need_ dollars, others will
be able to purchase things they sell with dollars.

Bitcoins on the other hand are created permanently, and BTC-denominated future
repayment obligations are tiny in relation to supply. Since virtually nobody
_needs_ Bitcoin there is little reason other than optimism for value to remain
above zero, never mind increase over time.

AMZN was not the only stock to drop in 2000-1. Enron also dropped. Bitcoin
does not have the properties of AMZN (a legal claim of a share of ownership of
a business which has since become very successul indeed) but does have similar
properties to those of Enron share certificates after the company was wound up
(people have spent money acquiring them, their authenticity is verifiable and
they cannot be duplicated, but they grant no claim on any tangible assets or
income stream and thus are only worth what some Enron-certificate-enthusiast
is willing to pay for them)

------
ilaksh
Cryptocurrency is just high tech money. Governments that ban cryptocurrency
just prove that they are obsolete governments.

I know this will sound crazy to most people but one of the things I am hoping
to see from artificial superintelligence is for repressive outdated human
institutions like the large countries to be replaced by systems that are
contemporary and functional.

~~~
X6S1x6Okd1st
Plenty of countries limit exchange of their local currency to other
currencies.

What are you on about with AI, that seems unrelated.

~~~
cinquemb
> _Plenty of countries limit exchange of their local currency to other
> currencies._

This is true, however if those countries (and companies within) take out loans
denominated in another currency, and want to pay in their local currency, they
still have to worry about the offshore exchange rate via instruments like non
deliverable forwards.

I wouldn't be surprised in the next coming years if NDF markets expand to
using cryptocurrencies to enable even greater speculation on those local
currencies.

------
chollida1
Makes sense.

You'd think that country that has issues with tax compliance and has already
done things like removing large denomination bills would want to move to a
fully traceable currency.

Furthermore it would make even more sense that it would use a currency of its
own creation rather than one that isn't under its own control.

I think most of finance has accepted that cryto currencies are the future, it
just won't be bitcoin or Etherium but rather a currency for each
country/region just like fiat currencies we currently have.

~~~
snitko
Cryptocurrencies don't make any sense unless they're decentralized and not
controlled by governments. That's where the value is. Bitcoin has value
because it cannot be controlled, printed (inflated) or easily confiscated. It
gives financial sovereignty and freedom.

But, it's not for everyone. You obviously believe that governments need to
control finances. That's fine. I think most people don't want freedom. But
there's certainly SOME percentage of the population that really want and value
freedom. That's why Bitcoin has and will continue to have value.

~~~
HarryHirsch
_Cryptocurrencies don 't make any sense unless they're decentralized and not
controlled by governments_

You can seat the people representing 90 % of hashing power on a stage:
[https://twitter.com/lopp/status/673398201307664384](https://twitter.com/lopp/status/673398201307664384)

That's decentralization now?!

~~~
tfha
There's a meme that hashing power is equal to control, but the truth is that
having a hashrate majority gives you a pretty limited set of powers, and if
you abuse them you will see people flee to other cryptocurrencies or systems.

