By Prarthana Mitra
Bitcoin startup Unocoin’s attempt to help cryptocurrency stage a return to the national conversation with the help of ATM kiosks suffered a setback, as founders Sathvik Viswanath and Harish BV were arrested within days of the launch of their first kiosk in Bengaluru.
The first crypto ATM of the country opened in Bengaluru this week courtesy Unocoin’s initiative to circumvent the RBI ban on trading in cryptocurrencies. However, the “unwarranted” police action sowed anxiety and contempt among cryptocurrency players and startups regarding the future of digital finance in the country.
The future of cryptocurrency
Many have spoken out against the arrest, calling it a completely unwarranted suo-moto action by the police. “No customer lost money. No customer was defrauded. Why were arrests made when there were no consumer complaints?” asked Harsh Vakharia, co-founder of startup Etherbit and registered reseller of bitcoin wallet Ledger in India.
Although cryptocurrencies have been disqualified from being exchanged as legal tender by the central bank and the government in July 2018, they are not officially illegal.
“While I am not familiar with the exact laws, I do believe cryptocurrencies have an alegal status in India. Since that is the case, this is not a criminal offence. No fraud took place, so registering it as a criminal offense seems to be an overreaction. If the authorities were concerned, maybe they could have looked at a civil suit, filed a case for not having a proper business licence,” CEO of Hong Kong-incorporated bitcoin hardware wallet BitLox, Dana L Coe, told the Times of India.
This recent crackdown on Bitcoin ATMs is being described as a classic case of overreach, and stakeholders are concerned that this indiscriminate arrest may invite similar unwarranted harassment and closure of operations for hundreds of crypto startups in the country.
Regulation can address concerns about crypto legitimacy
Cryptocurrencies became immensely popular over the past year, especially after Bitcoin made an enormous jump from $5,000 to $20,000 in just two months. A lot of countries, unable to digest such a massive disruption in financial machinery, declared it illegal at the time.
Supplanting traditional financial services has always been difficult in a country like India. According to reports, one of India’s largest exchanges Zebpay shuttered this September, after RBI banned banks from supporting crypto payments, and may have moved their operations to Malta.
Consequently, the startup ecosystem is worried about the ramifications of this recent arrest; it may intimidate founders from exploring new areas, especially as the government refuses to the need for regulating the sector. According to news reports, clients have already started asking crypto players for their license and regulatory permits.
“Innovation only happens when young startups push the boundaries,” Ravi Gururaj, president of entrepreneur association TiE Bangalore and founder of Qikpod, told TOI. “Hope authorities will release the entrepreneur once he agrees to ensure his ATM complies with existing ATM regulations. After all, innovators are biased to pushing the boundaries and challenging the status quo.”
Prarthana Mitra is a staff writer at Qrius