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Editorial: Bitcoin rides in on charity wave
In an hour of crisis, help comes from the most unexpected quarters.
Last month, former Australian pacer Brett Lee, in an act of paying it forward to his second home, India, donated 1 Bitcoin (BTC) worth Rs 40 lakh, to Crypto Relief, as his contribution towards helping oxygen supplies reach hospitals in the country. Lee is not the sole contributor to the crypto kitty. Vitalik Buterin, the co-founder of the blockchain company Ethereum, also set aside 100 ETH (Ether, a cryptocurrency like Bitcoin) and 100 MKR (a governance token used by Ethereum) valued at Rs 4.5 cr for COVID relief in the country. Similarly, crypto entrepreneur and former CTO of Coinbase, Balaji Srinivasan, has also donated 21.74 ETH (Rs 40 lakh) towards pandemic relief in India.
Lee’s gesture, along with that of the crypto innovators’ has reinvigorated India’s discourse on cryptocurrency. Crypto Relief, the platform put together by Indian professionals hailing from the blockchain arena, and spearheaded by Sandeep Nailwal, COO and co-founder of crypto start-up Polygon, has collected donations in excess of Rs 22 crore. Translating these contributions that are pitched as fast and transparent humanitarian donations into actual real-world currencies is a tricky affair. The reason is that cryptocurrencies like Bitcoin are not yet legal tender in India and no specific guidelines are regulating their usage. To top it off, the inflow of foreign funds for charitable purposes in India tends to invite extreme scrutiny from the government.
In March 2020, the Supreme Court had removed restrictions imposed on crypto exchanges by the RBI, making it possible for these exchanges to operate within India and procure a bank account as well. Finance Minister Nirmala Sitharaman had also gone on record to state that all windows on cryptocurrencies will not be closed down, amid speculation that the government might ban cryptocurrencies. The Centre had previously considered blocking the IP addresses of crypto firms as well as the exchanges on which the trading of cryptocurrencies took place. However, Sitharaman clarified that the Centre intended to allow certain opportunities for people to experiment with blockchain, cryptocurrency, and Bitcoin.
One of the drawbacks of cryptocurrency as seen by the government was that it was risk funding that could be raised globally, but is not tracked by any nation, thanks to its decentralised nature. Crypto assets built on blockchain technology are geographically agnostic and are characterised by their anonymity. Some of India’s leading operators in the crypto space, that were represented by the IAMAI (Internet and Mobile Association of India) had petitioned the Centre saying that it must not ban cryptocurrency as a robust regulatory mechanism is what the system needed.
The industry’s narrative has found strength owing to a surge in the value of 1 Bitcoin early on in April when it was valued at Rs 48 lakh. As part of the Centre’s efforts to provide some impetus to the crypto space, the government had listed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 which was supposed to be introduced and passed in Parliament session planned this year. The idea would have tied in well with the rollout of digital currencies, planned by many central banks around the world.
Regarding COVID relief via crypto funds, the main challenge is to bring the donations in cryptocurrency to an Indian exchange, where it can be sold for Indian Rupees and then channelled into the respective areas of relief. The donations will also have to pass through the scanner of the Foreign Contribution Regulation Act (FCRA), which will make assessments about compliance, and clear the funds for use. Needless, to say, if this one gambit works during the COVID pandemic, it might open up a whole new portal for transacting in cryptocurrencies in the Indian financial landscape.