Imagine the Government had decided to ban rubber, wheels and petrol and then immediately announced a funding initiative to produce more cars: we might rightly take the view its policy imperatives were out of whack. But that’s just the sort of the dynamic we can see playing out in India at the moment, where Blockchain sandbox initiatives are forging ahead at the same time as the Supreme Court is in the final stages of its death roll with the Reserve Bank over last year’s ban on cryptocurrencies. As the old song goes… “you can’t have one without the other” and its certainly hard to imagine a Blockchain world without cryptocurrencies, so where exactly is all this heading?
The Modi Government has been at pains to say the Reserve Bank ban does not necessarily mean cryptocurrencies are unlawful on the subcontinent, but such well modulated (and crafty) ambiguity is not an option open to the Judges currently hearing the case brought by the Internet and Mobile Association of India (IAMAI) against India’s Central Bank: these three Judges must finally come to an unambiguous decision on the issue, and when they do it’s likely to mark a decisive moment for the future of Blockchain not only on the subcontinent but for Global financial and commercial markets as well.
Lawyers for the IAMAI have been arguing the Reserve Bank simply doesn’t have the power to regulate virtual currencies, and certainly not without any prior legislative framework in place (there is none). They have also pointed out, not without justification, that the Reserve Bank would have been well advised to take market soundings and conduct market research before imposing its ban last year (it did neither), with the inevitable result that although Blockchain has now been given a green light for future development, the “arbitrary, unfair and unconstitutional” prohibition on its cryptocurrency life support system still remains in place.
But make no bones about it: the Reserve Bank will lose this case, not only because logic and fairness is against it (just like maintaining a ban on rubber, wheels and petrol), but the broader sweep of economic history is against it too.
Take, for example, recent events in India’s second largest State.
Maharashtra is currently preparing a regulatory sandbox for testing Blockchain technologies across a full spectrum of its own public services: everything from healthcare to vehicle registrations, agricultural produce, supply chain and document management systems and even printing children’s school examination certificates. It has earmarked no less than $1.4 Million for seedcorn investment in the project of which $560,000 has already been approved and allocated. Does any of that sound like it’s about to ignore a new model for technology markets? Of course not, and in doing so Maharashtra is merely following in the footsteps of its own Government’s IndiaChain initiative which, according to the National institution for Transforming India, will lead to faster contract enforcement, help eliminate fraud and deliver faster distribution of agricultural subsidies (amongst other things). Does any of that sound like a Government hiding from the future?
Of course not…
The truth is Blockchain is already being used extensively across India: not least by the subcontinent’s own Banking and Finance Sector (regulated by the Reserve Bank of India lest we forget), where day to day functions including KYC, credit approval and trade finance are currently being revolutionised through the use of new technologies: transactions that used to take hours (sometimes days) to complete are now being put through in a matter of seconds.
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I don’t think the Reserve Bank of India can have any real confidence in its ability to prevent the use of cryptocurrencies on the subcontinent, even if it wanted to (which I don’t think it does). But if only for reasons of saving face, it is now clearly committed to fighting its Supreme Court battle through to the end, even if that means losing and losing badly.
Looking at the bigger picture though, I’m not sure any of that matters greatly: if only because the Bank is likely to lose its case and the Government has already made plain its willingness to recognise a cryptocurrency environment. That’s what the future will look like.
For the moment, I’m excited to be living through such an interesting period when cryptocurrencies and Blockchain are now more likely than ever before to come together in an all-Indian regulated market.
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