Cryptocurrency Ban May Cripple Startups

A cryptocurrency ban could tank an emerging startup industry in India

- Vaisakh E. Hari

In 2018, World Bank estimates said that remittances to low- and middle-income countries had reached record heights. The annual remittances were a staggering $529 billion; the top recipients were India ($79 billion) and China ($67 billion). In Kerala, which boasts a large number of expatriates, remittances jumped by 14 per cent in 2018. But, through what avenues?

Saras (name changed) is a laboratory technician in Sharjah. “The remittance service that I use charges AED 17 for every AED 750 [nearly 14,500],” he said. “Some of them [blue-collar workers] depend on hundi [hawala] systems. The remittance rates are a drain on their resources, and most of them do not have bank accounts. They pay the hundi dealers in lump sums or instalments, which will then be delivered to their homes abroad.”

Hundi is so widespread among lower wage labourers that Pakistan (nominal GDP of $300 billion) estimated in 2015 that $15 billion was being transacted annually through the system. Even upper middle-class expats find the traditional remittance process cumbersome. “Sometimes, people here wish they could send money over WhatsApp,” said Saras.

Perhaps, a million such thoughts transmuted into skywriting, blazoned in red in the sky above Menlo Park. Tech giant Facebook, on June 18, announced the launch of its own cryptocurrency—Libra. In its mission statement, Facebook said it would be a “simple global currency and financial infrastructure that empowers billions of people”, a “reliable digital currency that can deliver on the promise of internet of money”, and “helping connect the world in a unified financial ecosystem, with open, instant, low-cost movement of money”. Libra, Facebook announced, would be backed by a basket of currencies to hedge against the kind of volatilities that plague cryptocurrencies like bitcoins.