Indian Prime Minister Narendra Modi’s government devised one of the country’s worst financial catastrophes to date, as the general population struggle to finance daily living amid severe shortage of cash. The Indian government’s demonetization of two most widely used banknotes and confiscation of gold has pushed people to search for alternative stores of value like bitcoin. However, mainstream media reports suggest the government is also planning a crackdown on bitcoin.
Daily trading volumes of leading bitcoin exchanges including Zebpay surged almost immediately after the announcement of Modi in regards to the demonetization of 500 and 1,000 rupee banknotes. With ATMs failing to support newly designed cash, financial chaos within the Indian economy worsened.
Bitcoin was one of the only stores of value which the Indian people could turn to, as other safe haven assets like gold and silver have been seized and confiscated by the government. Modi and the rest of the Indian government justified these actions by stating that such drastic changes are necessary in order to shut down various criminal groups and fraudsters. Ironically, the population that are still being hugely affected by the demonetization and tightened financial policies are the innocent people of India.
Initially, the thought process of Modi and his government going into the demonetization was, if criminals weren’t provided with a high denomination banknote, moving cash would become increasingly inefficient and impractical. The Indian government also banned the importation of gold for the same reason, to restrict stores of value accessible by criminals.
Like criminals, the general population of India also rely on cash and gold. Thus, if strict and impractical regulations are imposed to target criminals, the vast majority of innocent individuals and businesses will be negatively impacted. Despite the inevitable and obvious consequences, Modi went ahead with the initial plan.
However, local authorities are hinting potential regulations and restriction on bitcoin trading, claiming that it is possible for criminals to use black money to purchase bitcoin within the “digital black economy.” Since bitcoin is a P2P network, criminals can also trade directly with miners or bitcoin holders without going through an exchange, which makes transaction tracing and surveillance increasingly difficult.
It is likely that the government has come to this decision after mainstream media outlet India Today’s extensive coverage on “bitcoin scam exposure,” which was released to the public audience to create and spread bitcoin propaganda. The publication continued to describe the usage of bitcoin within the dark market, wherein criminals use the digital currency to launder money and settle fraudulent transactions.
Such logic and reasoning are severely flawed, as criminals always have and will continue to search for the most sophisticated and innovative technologies to supplement their complex projects. By that standards, vehicles such as cars are widely utilized by criminals but it doesn’t necessarily make much sense to ban cars for the general public to target less than 1% of the country’s entire population.
Experts including Tuur Demeester publicized India Today’s false coverage on bitcoin, and exchanges like Zebpay cleared up the propaganda to ensure that the Indian people understand bitcoin’s image is falsely portrayed by Indian mainstream media outlets.