Concerns rise as India bans cryptocurrency: Is your money actually safe?

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The announcement saw global Bitcoin prices fall 2.7 percent, showcasing fears among investors are rising as government responses to crypto continue to differ dramatically from nation to nation. Two cryptocurrency experts shared exclusively with Express.co.uk their insight as to why investors should see the positive amidst the “negative speculation”.

India is officially set to ban cryptocurrency after the long awaited bill was finally listed on upcoming legislation in parliament. 

The bill aims to create a framework for official digital currency to be issued by the Reserve Bank of India whilst prohibiting all private cryptocurrencies. 

Last week, India’s prime minister reportedly said the government had concerns cryptocurrencies could “spoil our youth” and that the central bank had warned it could pose “serious concerns on macroeconomic and financial stability”.

This legislation follows a similar crackdown in China whereby financial regulators and the central bank have made all digital currency transactions illegal. 

Many investors see this as an odd sequence of reactions as only in September did El Salvador become the first country to accept cryptocurrency as a legal tender. 

So, whilst smaller economies seem to be embracing the 21st century currency, major economies are increasingly wary with a devastating impact on the crypto in question. 

Vlad Vassiliev, Director at Vape Club, commented: “In recent times we’ve heard lots of negative speculation around regulation around the globe and when the announcements finally happen they are very positive for the crypto market as a whole.

“One has to also be sceptical of the intent of some of these often temporary bans, just like the Reserve Bank of India ruling on a complete ban two years ago which has been overturned by India’s supreme court.”

He explained that established institutions working with traditional currencies are concerned and resistant to blockchain technologies saying: “They will put up resistance to a new way of doing things that has the potential to make their organisations redundant.

“This latest ruling will just be another push or pull of the ongoing battle to adopt and incorporate the benefits of blockchain technology with legacy organisations that still rely on ancient methods to assert financial control.”

He concluded by saying that no decisive impression can be taken until the final announcement from India, noting that unbalanced regulation such as this proposed ban often leads to a “more prolific black market”. 

Whilst the ruling may not have been made yet, the announcement in India alone triggered mass selling on the country’ digital markets with the dollar-linked stable coin tether dropping 25 percent to only 60 rupees (£0.60).

Globally, the signature cryptocurrency Bitcoin saw a 2.7 percent drop to $56,171 (£42239.19).

Pavel Matveev, CEO of Wirex, a digital payment platform that combines cryptocurrency and traditional currency, commented on the situation.

“Outright bans often have an unintended consequence of driving people to higher risk, unregulated services where there is a greater financial threat to the consumer.” 

He added that all currencies, whether crypto or not, have an inherent valuation risk against other currencies, with developing countries such as El Salvador suffering from more significant fluctuations than others.

Mr Matveev continued: “Countries such as Singapore have established frameworks in the form of the Payment Services Act, which gives consumers and businesses the confidence to operate safely in the crypto space. 

“This goes to show that crypto can be integrated within an economy while prioritising consumers, and giving them access to the advantages crypto can offer such as lower costs and higher transaction speeds.”

Both experts agreed that for crypto to flourish in the medium and long-term a well-regulated environment is needed to help protect and benefit all stakeholders, and this regulation is sorely lacking across the globe.

When investing, it’s crucial to remember that capital is at risk.

Mr Vasiliev added: “While headlines like ‘India to ban cryptocurrencies’ may sound worrying for individual investors, I actually look at the headlines in a very positive way. 

“This is all positive news for investors as it legitimises the sector which ultimately should give private investors more security and confidence. The fact that there have been comments about promoting and protecting the underlying blockchain technology is also very positive and exciting for me from a technology adoption perspective.”

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