There was a small news report in 2018, followed by another about an alleged criminal Amit Bhardwaj, said to be the mastermind of $300 million Bitcoin sale and got bail from Supreme Court in April 2019 on grounds of health. Financial crimes, banking and currency related frauds, misappropriation to the tune of millions of rupees are so common now and huge in size; and hardly anyone has been convicted till the present government came in.
Therefore, this news on some remotely heard currency like Bitcoin and fraud perpetrated through crypto exchanges did not really stir or shock anyone. However, if you consider that Indian economy has lost about $15 billion through Bitcoin and other digital currency routes, then the neglect of such a serious matter is at our own peril.
This indifference arises from the fact that people don’t know enough about this mysterious repository of international funds. It is also shrouded in technical mumbo-jumbo like Blockchain technology that it is does not cross anybody’s mind that the dark web is the route of international trade in this currency and various kinds of criminal transactions. It is not that the current government of Prime Minister Narendra Modi is unaware of the problem. In fact, the Reserve Bank of India (RBI) has banned trading in Bitcoin. But, it is as simple and difficult as banning porn on the Internet. You can’t really ban it.
What is needed is intelligent tracking mechanism to take timely action. Bitcoin and similar digital currencies have wide ramifications for the slush fund universe and terror industry. It seems it has not been taken cognisance of it the way it should be. There was a closed door United Nations (UN) conference with an Indian think-tank Begin India Research, specialising in cryptocurrency forensic in December 2019. A report on cryptocurrency and terror funding was released during this conference.
Interestingly, it was chaired by Dr Subramanian Swamy, who has more exposure to international finance and slush money than most of the Indian politicians due to his international connections and strong academic background. I am sure, Indian government agencies too would have been present. The fact that UN itself has got involved in this exercise shows the international ramifications of Bitcoin and tech-backed cryptocurrencies. Sensing the invevitable march of technology, Dr Swamy said that India should have its own digital currency. According to Bitcoin.com, the RBI governor had an internal meeting to examine this possibility, but it didn’t find favour. There is also a case in Supreme Court against RBI for banning Bitcoin.
Apparently, Bitcoin and similar digital currencies are very serious issues and deserve better exposure and more serious discussions than what has been done so far. There is something amiss. It is the lack of attention from media, including media specialising in finance, to highlight the criticality of this issue and woolly understanding of Indian finance managing institutions like RBI in controlling the demon. Why do I call digital cryptocurrencies, and their facilitating crypto exchanges as demons? Look at some startling facts – The figure of $ 15 billion drained out of Indian economy is an educated calculation by Deepak Kapoor of Begin India, a think-tank working in this domain. This money has been siphoned off online via various cryptocurrency scams away from any country’s central bank or legal jurisdiction.
A positive sign is that out of this, $7 billion has been traced online by an India-based research company, not recovered as that is in government domain. This drain is much more dangerous for the nation and safer for the players than the famous tax-havens, as of now. It is claimed that more than 70 per cent of all the cryptocurrency held in crypto exchanges is used for illegal activities like terror funding, arms, narcotics, child trafficking and ransom calling, apart from innocuous activities like gambling.
These slush funds of the dark web can cripple and undermine central bank of any country and also that country’s currency. For India, the big risk, apart from dangerous terror funding, is rapid growth of cryptocurrency transactions. Reason, obviously, is its anonymity and difficult traceability in a country with lax laws and an attitude of locking the barn after the horses have bolted. This could result in large chunk of commerce shifting to online black money.
Crypto exchanges are run on the most secure networks based on latest technologies. Our Finance Ministry and all related financial institutions are generally run by generalists, mostly IAS and IRS. Their inclination towards status quo implies that they may not be fully capable nor they may have the in-depth skills to fight this menace. It is possible that intelligence agencies too may not be fully conversant with the depth of these operations, or may not have enough muscle to take the institutions along. The most worrying fact is that nearly 68 per cent of cryptocurrency today is in the hands of China as they are the largest cryptocurrency miners and originators of cryptocurrencies like Bitcoin and Ether etc. To control this menace, the government may have to bring in policy legislations for which the lawmakers will have to be educated on this topic.
Generalists will not do, specialists will have to be invited by the government to help formulate such policies. Bureaucracy will have to be realigned to the new rising threats to the nation. All the agencies involved in national security will need to be taken into confidence. RBI and its technical arm ReBIT will need serious retraining to bring themselves up to the mark. According to specialists, we may be two years behind the world in this matter. A small country like Ukraine, seems to be much bigger knowledge hub in cryptocurrencies than a country like ours. I hope the policymakers and relevant leaders get this message and we can take the right steps to strengthen our economy.