When the cost of the land has been pegged much lower than the market rate, everyone of us will be in race to buy this land. But when you learn that the piece of land is disputed and title deeds are not clear, would you be inclined to invest your hard earned money in this piece of land? I am sure none of us would like to get into a dispute and block money
Similar is the case with cryptocurrency. I have been warning about the high risk involved in investment in cryptocurrencies like Bitcoin etc. Speaking in the local context, I was surprised when I learned that we have thousands of such investors who stand invested in different cryptocurrencies, especially Bitcoin.
Cryptocurrency is a disputed asset in India, as the government of India (GoI) has not recognized this virtual currency in its financial system. In mid last year, the GoI even asked banks not to allow any kind of transaction involving investment in cryptocurrencies. This gave a big jolt to the crypto market here in India and subsequently to the local (J&K) investors. The move drove many crypto exchanges out of business in India.
Notably, the Reserve Bank of India (RBI) while observing the growing appetite of Indian investors in cryptocurrencies had earlier given indication of introducing its own cryptocurrency. The central bank in April last had first floated the idea of issuing a national digital coin called Central Bank Digital Currency (CBDC). That announcement came after it barred all banks from doing any business with crypto-related companies.
This had raised enthusiasm among the Indian investors in crypto market and pinned high hopes that the virtual currency would be regulated and given the legal backing. But, if media reports are to believed, the RBI has shelved its plan to launch a national cryptocurrency.
Why GoI has remained guarded against cryptocurrency despite lot of potential in the market? So far, we haven’t come across any official statement in this regard. But the global scenario of the crypto market suggests that all is not well with the countries where this market has even a legal backing.
Globally, crypto market is seen by the experts as convenient route to launder ‘dirty money’. The experts have pointed out anti-money laundering standards pertaining to digital assets and virtual currencies “very much a patchwork quilt or spotty process.” This is what has exposed the national and international financial systems to vulnerabilities. Even as strict anti-money laundering laws are in place in India, the nature of cryptocurrencies remaining out of the ambit of central banks leaves such laws ineffective.
Hackers too have added woes to the crypto market operations. Thefts in crypto market have been growing alarmingly. Let me borrow some facts from the latest report by US-based firm CipherTrace, which tracks money laundering and criminal activity in the digital currency market. The popularity of cryptocurrency has drawn the attention of hackers “as a whopping $927 million worth of digital currencies was stolen in the first nine months of 2018. Smaller thefts in the range of $20-60 million have steadily risen, totaling to about $173 million in the third quarter, with more frequent attacks becoming common.”
The above stated facts should serve as an eye opener for the local (J&K) investors. Those already in the market should wait and exit at appropriate time.
(The views are of the author & not the institution he works for)
sajjadbazaz@greaterkashmir.com