The US President-elect had promised to foster a strategic bitcoin stockpile, which would effectively turn it into a reserve asset, and to establish a crypto advisory council
The acquisitive proclivity and the associated speculative mania through fair or foul means by which a considerable number of people in our midst both nationally and globally suffer from have always tested the capabilities of the authorities everywhere to build the requisite guardrails to forewarn others or punish those already in the thick of such scurvy activities. One such ruse to get quick riches is the new-fangled craze for acquiring bitcoins or crypto-currency that surfaced the world over a decade and a half ago sans much ado but by degrees gained traction to the chagrin of the traditional central banks which viewed this new speculative currency that multiplies like maggots in value to pose challenge to the financial stability of individual nation.
Still, tax evaders and money launderers prefer doing brisk business with this facile medium of exchange as it is “no-questions asked technology”. Even stable coins – crypto currencies (putatively) backed by liquid dollar assets – a hybrid version of the dollar instead of the real greenback are easier to proceed with in all the dubious undertakings as this avoids all gauche queries which broaching a bank account entails! Interestingly, even as crypto currencies were supposed to render banks irrelevant, this has not occurred presumably because even the crypto firms or individuals trading in it require bank accounts to do transactions. It is in this backdrop that commercial banks justifiably deny accounts to firms flush with crypto wealth having truck with money laundering or terrorist activity that impinges upon normal life and activity.
In spite of all these concerns over bitcoins, the return of Donald Trump as the President of the Unites States of America has once again animated life into the users of this designer currency! In fact, during his campaign in the election, Trump promised to foster a strategic bitcoin stockpile, which would effectively turn it into a reserve asset and to establish a crypto advisory council. No wonder his return signifies crypto’s resurgence among illegal currency speculators, following the collapse of Sam Bankman-Fried’s exchange FTX in late 2022 that caused a global crisis and the cognate price fall of bitcoin to just 16,000 dollars. The latter fallout made many to refrain from playing in the market lest they should get badly bruised financially. Ironically Trump’s return to the top post saw bitcoins breaking through the one lakh dollar mark for the first time ever as he is hailed as “the most pro-crypto President” by no less a person than his second son Eric Trump who was the cynosure at the Bitcoin Mena 2024 Conference in Abu Dhabi on December 10. With the imminent Trump Administration getting ready for its tenure in the face of the US Stock Exchange Commission’s relatively strict oversight in the easy crypto operations that was a binding constraint hitherto might change for a light-touch regulation, a fear that would have wider global financial stability implications.
It is against this dismal setting India must perforce have to get firewalls built against any probable or feasible attacks on the systemically important financial institutions and their stability to deal with such threats from the limited but the burgeoning users of tech-savvy cryptos. As it is, cybercrime has raised the hackles of genuine people in the digital financial ecosystem where fraudulent elements hoodwink the gullible ones with deft ease and go scot-free. In a situation where the fraudsters even use to threaten their potential victims by holding digital courts, some checks and balances ought to be in place for penalising the growing use of cryptos. That the country’s Narcotics Control Bureau has during probes detected instances where drug traffickers have used cryptocurrencies such as Bitcoin, Mondrian, XMR, USDT, TRX and Ether is not unsurprising!
It is germane to note that although the apex bank has issued the Central Bank Digital Currency (CBDC) guaranteed by the central government, with both the CBDC-retail and the CBDC-wholesale had been fully rolled out, it is not clear as to why there is no full-scale launch of the CBDC till date or in the foreseeable future! With crypto currencies set to gain freshly frightening lease of life from the citadel of capitalist US before long, Indian law enforcement agencies (LEAs) both at the national and State levels, ought to gird up their puny resolve to fight the new menace so that such ill-gotten wealth from crypto maniacs do not get financed for illicit activities ranging from terrorism to drug trafficking with the latter denuding India’s much-vaunted demographic dividend to end it unceremoniously and unwholesomely.
Interestingly, in a written response to a query in the Lok Sabha in the just-concluded winter session, the Minister of State for Finance Pankaj Chaudhary said LEAs have identified cases where crypto currencies have been linked to activities such as narcotics trafficking, drug smuggling and illegal foreign exchange operations. In one such instance identified by the Directorate of Enforcement, it was found that crypto currencies for money laundering purposes were used. Necessary action under the provisions of Prevention of Money Laundering Act, 2002 (PMLA) was made by seizing bitcoins amounting to Rs 130 crore, besides proceeds of crime amounting to Rs 9.67 crore have been attached. Such vigilance needs to be stepped up for the benefit of our economy in general and the financial stability in particular.
(The writer is a senior economic journalist based in New Delhi.)
