The Prime Minister of India played a master stroke to flush out the ‘Black Money’ holders and non-taxpayers last week. In a surprise announcement, Narendra Modi revealed that the bigger denomination bills were banned starting from that date. For people who had bills in this denomination, it became mandatory to get them exchanged at the nearest bank. Let’s look into why this was a surgical strike on black money and how this can boost Bitcoin prices:
India and Corruption:
India is a country with a population closer to 1.4 Billion. It becomes complexly difficult to monitor the tax filings for all income groups. The Indian currency has Rs 1000 and Rs 500 bills as their biggest denominations. It is estimated that most of the money that is not accounted for taxation (popularly referred to as Black money) is stored in these denominations. Hence as a first lash on the prevalent corruption, the Prime Minister recalled bills of these denominations, replacing them with newer versions of the bill. For replacing older denominations, people would have to go to banks and get the money accounted for before replacing them. This has created quite a stir and great deal of discomfort for the Indian population, but the public has responded positively to this strategy with a tolerant mindset.
For people holding huge reserves of untaxed money, it is now mandatory to account it to get value in return. Else the reserves would go waste as the replacement of the existing denominations is scheduled only till December 31st.
Bitcoin scenario in India:
The Reserve Bank of India has taken a neutral stance towards the cryptocurrency in 2013. They proclaimed that they are closely monitoring Bitcoin and would come to a conclusion only after fully understanding the technology. With the Bitcoin ecosystem in the country developing gradually, there is a strong possibility that this might boost the adoption. Companies like Unocoin, Zebpay and other wallet services have flourished organically in a set up that has been bending more towards e-commerce. On an average there is a volume transaction of 2051 BTC on Indian exchanges.
In 2015, when China announced capital controls, it turned out to be a boost for Bitcoin prices. Even though India doesn’t have a strong hold in the Bitcoin domain, it has a comparable population. Over the past few months, the volumes of LocalBitcoins in India has been on the rise and shown a significant rise. With this move, the population is facing great discomfort as local banks and ATMs are flooded with people in a bid to withdraw money. It is only a matter of time, before we see wallet companies partnering with franchises to provide cashless services.