Breaking down myths and conspiracy theories as government tables bill in winter session
The Indian government has announced that the Cryptocurrency and Official Digital Currency Regulation Bill, 2021, is expected to be tabled during the winter session of Parliament. The bill will aim to create a framework for the official digital currency to be issued by the Reserve Bank of India. The bill seeks to “ban certain private cryptocurrencies while allowing certain exceptions to promote the underlying technology and its uses.”
The Central Bank’s digital currency is a systematic first step towards adopting blockchain technologies to improve administrative service delivery capabilities in the most remote areas of the country. This will pave the way for the legalization of cryptocurrency in India. It seems that the Indian government understands the complexities involved and is moving forward in a critical, balanced and thoughtful manner.
It appears India is considering restricting private coins which by design limit access to their transactional information. It could also be a welcome move, as these coins could be misused in the darknet and for money laundering. It is a systematic progressive step towards the adoption of new technologies that will help break the imperial chains of bureaucracy imposed by the British colonial system.
The government notification created some consternation in the crypto markets and some of the coins fell as much as 20%. Taking advantage of this chaos, some so-called experts are stoking the fire by advancing their conspiracy theories to destroy cryptocurrency and make some myths fly. To raise the level of crypto discourse in India, we need to understand some crypto basics and dispel these nine widely held myths.
Myth 1: Crypto is gambling
Under existing laws, tokens are not securities. A token is just a computer code, the code is just speech, and speech is just an idea. Lots of cryptos have real end-use apps or solve real-life problems. Just as the Indian stock markets of the 1980s saw huge speculation, scams, wrongdoing, it was not gambling. Likewise, cryptos are not gambling. Even if the government prohibits the trade in certain parts, it cannot stop the idea or the technology behind it. That aside from the bans never worked. For example, George Orwell’s 1984 became a worldwide bestseller simply because it was banned by an oversized bureaucrat.
Myth 2: People will lose money in crypto
We have seen it, whether in personal or professional life, no one is safe from falling into the scam. Even the big investors have lost millions for not checking the basics. Therefore, the tulip madness and teak wood fraud happened because investors failed to do their basic due diligence. Such things also happen in highly regulated markets like stocks, bonds and currencies.
People fell prey to easy-to-win schemes because they did not understand the technology. If you don’t check out the basics like a contract’s functions of the tokens they’ve invested or the amount of non-blocking tokens managed by the team of developers, or invest in projects that have no real use to the business. future, then you may lose money. Then it can become like a Ponzi scheme with a pump and dump mechanism.
Myth 3: Cryptocurrency has no underlying assets, so this is a Ponzi scheme
Cryptos are codes. When two codes transact in real time, they cannot wait for the different rules of several nations involved in the transaction to agree on uniformity. The adoption of this technology has been very rapid and has spread across the world and people are using cryptocurrencies to buy sandwiches, arts, mobiles and maybe much more. It’s a losing game to try to restrict technology. Generally Accepted Accounting Principles (GAAP) treat cryptocurrency as an intangible asset (not a financial asset) that is recorded at cost, and the depreciation of the cost of the asset should be recorded. This means that the value can be reduced on a balance sheet over time.
When you deposit change in a bank, it stores it in a safe until you come back to collect it. In fact, your bank deposit is a loan from you to that bank which does not hold any reserves, which makes you an unsecured creditor. So even the safest investment in the world today, namely bank term deposits, does not actually have any underlying assets. It only works on your belief that one way or another the government is going to step in and save bank depositors in a crisis.
Myth 4: Cryptocurrencies are a “limited supply of nothing”
I will give you an example to support this apprehension. There is no limited supply for Ethereum, which ranks just behind Bitcoin in popularity. More importantly, Ethereum earns $ 80 million in platform fees daily from third parties alone.
Myth 5: Crypto thwarts the authority of governments
Not necessarily. The Indian government may decide to regulate cryptos as an asset class while providing regulatory oversight when cryptos are used as a medium of exchange. The modern industrial monetary complex operates on the US dollar and some of the powerful countries are trying to escape the dollar fiat system. India will have an advantage if it introduces an alternative digital universal payment system.
Myth 6: You can’t get super rich by investing in cryptos.
Try saying this to those who invested in BITCOIN between 2010 and 2013. To add to that, cryptocurrency is great for India to jump into the big leagues. Indian youth have education, enterprise and innovation. If they can create and sell WEB 3.0 technology solutions, we can define the future of the world.
Myth 7: There can’t be a global consensus on ONE private crypto needed to become a global currency
Waves of centralization and decentralization always occur in cycles like ebb and flow in the leitmotif of time. At one point we had millions of tribes doing their own thing, and then most of them came under the aegis of the Catholic Church. Then, at the turn of the 16th century, the printing press and Martin Luther led to a decentralization which resulted in the birth of different religious sects, philosophies and nation-states which eventually heralded the industrial age.
Myth 8: Crypto is all speculation and it’s not really a market
The evolution of web 3.0 technology is already happening on the channel. Thus, marketable digital assets in the DeFi (decentralized finance) matrix will lead to the transparency of order books across the world. Order book transparency can eliminate 99% of the evils of today’s centralized market infrastructure. In DeFi, automated order books can make instant price discovery through tokens, contracts, NFTs, fiat currency, etc. This is the future of modern markets.
Myth 9: Cryptos are bad for the environment
More than cryptos, human greed is bad for the environment. The answer is not to stop living but to evolve and correct flaws. Power consumption and high gas costs are just temporary and repairable flaws in the cryptocurrency ecosystem.
The overhaul of the financial system through the introduction of digital currency will destroy the existing system manipulated by individuals and businesses for their own benefit. The blockchain platform developed by India will be a milestone for rural economic development. I argue that a central bank blockchain platform as well as a regulated crypto market will benefit India’s tech ecosystem. I firmly believe that the government will consider the views of all stakeholders before drafting comprehensive legislation that incorporates the aspirations of technology and the financial community.
(Santanu Chakraborty is a market maximalist who founded a company that develops blockchain technology solutions. He is an investor and digital tech enthusiast. He was the former market reporter at Bloomberg LP and Dow Jones / Wall Street Journal )