Let there be a law first, and then invest in a cryptocurrency

Let there be a law first, and then invest in a cryptocurrency


Most of the world’s geographies are still grappling with the legality around cryptocurrencies and clarity on this has not yet emerged. Last week, the US Securities and Exchange Commission (SEC) crashed heavily on two exchanges: Binance and Coinbase (NASDAQ:). In such a scenario, caution should be the buzzword.

As far as India is concerned, cryptocurrencies, although traded, are neither legal nor illegal. The exchanges are there but without regulation. This is a huge cause for concern because investors bear the brunt of any dispute. There is no arbitration.

The tax department does not consider the cryptocurrency business to be an honorable or fair way to make or lose money.

There is also the ‘dark web’ where illegal things are available, for example prohibited products and drugs instead of a cryptocurrency. The use of cryptocurrencies has also facilitated the payment of bribes and clandestine activities in all countries.

He Reserve Bank of India has discussed cryptocurrency at various times, but has yet to decide on strategy. Today, the opinion is that it would not be allowed in the country and the country would need more time before deciding on it.

At the same time, there are various cryptocurrencies in India and one wonders how they thrive. They resemble and mimic the movement of penny stocks in the stock market and have a large following, most of whom are here to make a quick buck.

Stock markets by comparison are much simpler, with proper collateral, a proper dispute resolution mechanism, an arbitration system and, above all, a powerful regulator in SEBI.

Lacking all of the above in the case of cryptocurrencies, the investor is always at the mercy of the exchange on which they have traded. It’s like playing a game of soccer with one hand tied behind your back.

The maiden beckoning from behind a veil is mysterious and therefore beautiful, but it must be left that way. Just because one is unclear about the legality of bitcoins in India, venturing into the same may not be the best thing to do. It is dangerous as profits and losses are not predictable.

The more you get caught on the wrong foot with legal issues and worst case scenario when you have made money, one can get caught by illegality or dark web.

In conclusion, crypto is best left to the brave, regardless of the temptation to make a quick buck. Let there be a law on the instrument before you jump on the bandwagon. As they say, better late than never.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. Opinions expressed are personal)



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