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Not just three generations of
blockchains have simultaneously grown as a collective wave rather they have
also grown laterally with rise of interesting tools and industries like
Decentralized Finance (Defi), Non-Fungible Tokens (NFTs) and Layer II scaling
solutions like Polygon, Lightning Network, ZK Roll-ups and so on. Though there
is no exact proof, it is estimated that there are around 200 million users
already on-boarded to this ecosystem and more than 10 million transactions are
happening daily as of now (August 2021).
These are largely censorship
resistant systems that are nearly impossible to ban by even powerful regulators.
Even if they prohibit their use, it will only drive crypto currencies
underground but not kill them. The foundational logic behind this is that they
are planetary infrastructure used by peer-to-peer actors. They are completely
parallel to KYC-led banking networks and other regulated financial activities.
In this scenario, how to regulate crypto currencies is a big headache for
governments. If their use rises underground, it will result in loss of taxation
as well as compliance culture. If they are to be regulated, it will require massive
global cooperation of scale as big as creating a new global parliament. It
seems a non-possibility looking at the splintering of global opinion in matters
of origin of covid-19, eradication of poverty, human migration resulting from
global warming or regulating big tech and many such issues. What options does a
developing country like India have in this kind of a historical setting? If it
does not allow crypto currencies, it kills the huge wave of innovation thriving
in the brilliant entrepreneurs of India. If it allows them without
restrictions, how to stop the spill over of black money operators using crypto
currencies? If it does not build a credible regulatory framework, its large
corporate class and citizens will never know how to leapfrog with this new wave
of wealth-building.
1.1 The
difficult economic outlook for a post-pandemic India
The universal shutdown due to
Covid-19 has hit Indian economy harder than many countries. As per Centre for
Monitoring Indian Economy (CMIE) report, India lost 114 million
jobs in April, 2020. Though the situation improved in the second half of the
year, it is still not rosy enough. India’s pre-covid employment number was 404
million workers. In May, 2021, this number had declined to 375.5 million which
means loss of 28.5 m jobs. The overall state of Indian economy showed a
shrinkage of 7.3% in the year
2020-21 and even the hopeful rebound in 2021-22 was downgraded from 12.5% to 9.5% by the
IMF. Though the Indian government has done its bit to control the problem, it
is more damage control rather than pulling the economy out of a trap. It seems
that these two financial years 20-21 and 21-22 would end up with a GDP that
would be lesser than it was in 2019. For a developing economy that was already
slowing, this is a double whammy. Though some sectors have bounced back yet the
broader economy is having K-shaped recovery. ..........................................Pandemic has paralyzed all
territorial units of productivity and income for nation-states, enterprises and
individuals. If
virus is a singularity attack, political regimes need a singularity defence. Radical monetary imagination alone can stop the second
order effects of this pandemic.
3.0 Time to make
out-of-the-box choices
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