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Is RBI's decision to ban cryptocurrencies correct?

April 19, 2018 08:29 IST

'Governments that embrace blockchain and cryptocurrencies will be best positioned for the future.'

'Digital currencies are more transparent, more efficient.'

Recently, the Reserve Bank of India banned regulated financial institutions from working with any company dealing in digital currencies, thereby effectively banning cryptocurrencies in the country. The move triggered a price crash in bitcoin.

As all of this was unfolding, Anthony Pompliano, below, general partner at Morgan Creek Capital Blockchain in the Silicon Valley, took to Twitter and said he would fly down to India and meet the prime minister, RBI governor or even the President, if someone sets up a meeting, and explain to them the “negative effects of the RBI decision”.

 

Pompliano shares his views on cryptocurrencies with Mayank Jain in an email interview. 

What made you tweet about coming to India and explaining the benefits of cryptocurrencies?

Cryptocurrencies are a new, powerful innovation that can create significant inflection points for humanity.

India is a country of innovation and I am excited about seeing the country lead the industry.

I have previously visited many cities in India and seen the passion the citizens have for the technology.

What do you think will be the impact of the move? What are the positives and negatives?

In the short term, there will be a lot of uncertainty. The market will likely reflect this. But I doubt it will matter in the long term.

The governments that embrace blockchain and cryptocurrencies will be best positioned for the future.

The ones that fight it, will merely get left behind.

Are there instances of developing countries accepting cryptocurrency and succeeding at it?

There are many countries that are accepting cryptocurrencies or launching their own.

Major fears about bitcoin are about its anonymity, possible money laundering, and volatility in price for those who invest. How do you counter these claims?

Bitcoin is run on a distributed, public ledger.

Every transaction is recorded for everyone else to see.

You would have to be the dumbest criminal in the world to use a fully transparent digital ledger to conduct nefarious activities.

Plus, the US dollar is still the currency of choice for criminals, drug dealers, money laundering, and bad actors around the world.

India’s central bank is looking to study the possibility of its own digital currency. What do you think about a cryptocurrency owned by a central bank?

I think there will be centralised and decentralised digital currencies. They don’t have to be binary outcomes.

Having multiple digital currencies co-exist seems plausible and likely.

Where are the possibilities for India’s bustling cryptocurrency market now?

I am not a lawyer, so I am not exactly sure. We are trying to understand that now.

Do you think cryptocurrencies have any advantages over conventional currencies?

Yes. Digital currencies are more transparent, more efficient, and bring a deeper level of trust between people and their money.

Within the next 15 years, we should see a majority of currencies become digital in the world.

What should be the right policy response in a country like India where digital penetration remains low and people are illiterate to something as complicated as virtual currencies?

People should be allowed to use fiat or digital currencies. This does not have to be a binary outcome.

The co-existence of fiat and digital currencies will allow the highest number of people participation in the financial system.

What do you think is the potential for virtual currencies in India given the current policy environment?

I am in awe of the innovation that comes out of India.

They have the talent and mentality to be a global leader in cryptocurrencies.

My hope is that the government can work with technologists and economists to create an environment that encourages progress and innovation.

Photograph of cryptocurrencies (top): Dado Ruvic/Reuters.

Mayank Jain
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