Good riddance to cryptocurrency bar

Good riddance to cryptocurrency bar

For fintech innovation, not bitcoin gambling

It is welcome that the Supreme Court has nixed an RBI circular preventing any entity regulated by it from dealing with cryptocurrency transactions. This meant that while cryptocurrencies were themselves not banned, dealing in them was. The court’s ruling hinges on the lack of proportion between ban and the yet-to-be-demonstrated damage potential of cryptocurrencies, which are themselves not banned. If the government were to come out with a ban, the court’s ruling would be rendered infructuous. Instead of banning cryptocurrencies, the government should empower RBI to regulate them, not as stand-ins for fiat currency but as commodities that can perform some of the functions of money — make payments, store value, serve as a unit of account.

This does not mean that the Supreme Court has put its stamp of approval on bitcoins and their assorted clones, whose peddling as fantastic investment options is a prime goal of many who cheer the court verdict. Fools are free to part with their money in whichever way they choose. Bitcoins have swung wildly in value and only those who are financially most secure and have the stomach for extreme risk would be advised to treat them as investment assets. It is not because bitcoin exchanges are now free to work that the court verdict is welcome. Bitcoin and its clones are just one type of tokens on the blockchain. There are several other kinds of tokens, including contracts and currencies, whose values are calibrated against a basket of major world currencies, that could be created and would be of immense use to society. Fintech could do wonders with the blockchain — for example, cut the cost of cross-border remittances from the minimum of 5% today to 1% or less.

The world desperately needs to free itself from American ability to weaponise the dollar, bar those who violate US sanctions from dollar networks. One way out is a blockchain-based currency, whose value is calibrated against a basket of major world currencies, to settle international payments that do not involve a US counterparty. The RBI ban proscribed such innovation.