Bitcoin in India… What’s Really Going On?

Bitcoin chart 2017

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In the last 24 hours, the Indian government has made statements regarding certain illegal use of Bitcoin in India.

Specifically, the finance minister indicates that Bitcoin is illegal for use in payments as legal tender. He also indicates that Bitcoin should not be used for illicit purposes, such as financing illegal activities.

The stern language seemingly applies to any cryptocurrencies that may be used for payments… The minister of finance refers to them as “crypto-currencies” and “cryptoassets”.

The website IndiaBudget.gov posted the comments this morning. In item #112 of the announcement, Arun Jaitley, the Honorable Minister of Finance is quoted as saying:

“Distributed ledger system or the block chain technology allows organization of any chain of records or transactions without the need of intermediaries. The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system. 21 The Government will explore use of block chain technology proactively for ushering in digital economy.”

The price of Bitcoin slid considerably after the announcement, to almost $9,000. Almost all cryptocurrencies are having a down day.

I think the markets will react strongly, either way, to almost any material cryptocurrency news. That said, the crypto market seems to be in a downward trend. This should not be surprising, considering the massive run up.

Bitcoin chart 1300% 2017

Will Bitcoin Go To Zero?

The number of countries that have banned Bitcoin keeps increasing… Bitcoin is banned in 8 countries, including India, Ecuador, Kyrgyzstan, Nepal, Bolivia, Bangladesh and Morocco.

However, it seems unlikely that it will go to zero. Bitcoin not only has a thriving legitimate market of investors and speculators in the U.S. and other countries… It also is being embraced by commercial market makers, such as banks.

Cryptocurrencies and digital assets may be used for good or ill. Bitcoin has legitimate uses, and has proven to be captivating as a potential alternative store of value, akin to digital gold.

Bans on Bitcoin are more likely to be short term efforts to assert control that will not last long.

History is littered with attempts to limit advancements in technology using bans. Countries have banned VPNs, iPads, Facebook, Blackberries, even playing video games after midnight. In 2004 Saudi Arabia banned cellphones with cameras, claiming they spread “obscenity”. This rule was later reversed.

As for whether Bitcoin bans or actions will have a long term effect on cryptocurrencies, I think not.

The immediate deflation is normal after any massive rise in speculative value. Let it pop.

Let the cryptocrap coins fail. And let the legitimate crypto entrepreneurs enjoy some much needed schadenfreude.