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Can cryptocurrency bulls provide relief to India’s COVID-19 crisis?

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cryptocurrencycryptocurrencyIndia has had an uncomfortable history with crypto. (File Photo)

There is a new conversation unfolding on Twitter. Those with cryptocurrency money bags are swapping ideas on ways to back COVID relief in India. Sandeep Nailwal, co-founder, Polygon – a platform for Ethereum scaling and infrastructure development, for instance, tweeted saying: “Can’t take this sitting down anymore, I am going to run a COVID relief campaign in lieu of what is going on in India. Need help from the global crypto community. I will take full responsibility for transparency, funds usage and regulatory compliance if you want to donate…”

Then, there is a tweet by Joe McCann, who describes himself as an entrepreneur, angel investor and margin trader, saying “this is a good example of why India embracing crypto is a good thing…crypto is instant and the money can be raised globally. There’s a humanitarian crisis unfolding there…”

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Apparently, there is a lot of confidence in the medium and its ability to respond. In fact, in a matter of just a day over $300,000 has been raised already.

In matters of public health, every volunteer matters and every rupee counts and with India’s COVID caseload touching worrying levels – currently staying at over 3 lakh new cases a day – any effort to serve a cause should normally be welcomed. But then, India has had an uncomfortable history with crypto. In March 2020, the Supreme Court finally lifted the restrictions imposed earlier by the Reserve Bank of India and today it is possible for crypto exchanges to operate in India and procure a bank account.

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Those who track the space, say the fundamental problem that India has had with crypto has had more to do with its characteristics. The fact that it is seen as risk funding that is raised globally but not tracked by any nation and therefore when it comes to spending for a cause, funds need to be accounted for, which may not be very easy in the current context of cryptocurrency.

One of the important characteristics of cryptocurrencies is that they tend to be largely unregulated and use cryptography to secure and verify transactions and for the purpose of managing the creation of fresh units. At its core or the technology on which crypto assets are built is the Distributed Ledger Technology (DLT). One example of this is blockchain, a distributed ledger that uses blocks of information to carry out digital transactions. The crypto assets are built on this blockchain platform but it follows no geographical boundaries and there is anonymity associated with it, which is where some of the problems currently seem to lie.

In a sense, as one expert who has looked at this subject closely but does not wish to be identified, says, “it is viewed as any venture capital (VC) or private equity (OE) supporting Covid cause but in this case, stands out for no traceability of the source.”

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So, what could be the positives and the challenges of crypto bags heading for COVID relief? Some view it as chasing a noble cause and therefore to be applauded. Others want to get more clarity on the legal aspects. This is because, as yet another industry expert puts it: “Compliance of donations from foreign sources and their structuring will have to be assessed with the Foreign Contribution Regulation Act (FCRA) will have to be assessed because that is the law governing foreign contributions made to entities in India.” Apparently, there is still no clarity in the legal circles on how the Act will treat cryptocurrencies so could be open to interpretations since the FCRA may not refer directly to cryptocurrencies but then does refer to articles of value that are donated. In which case, only an FCRA approved organization should be able to get the contribution and follow the approval process to receive foreign contributions.

Much depends on who is donating the crypto assets and who controls the wallet. Apparently, the plan seems to be to bring cryptocurrency into an Indian exchange and then sell it in the exchange for INR and then use that to make payments for the COVID-related charitable causes. How it all pans out now, needs to be seen.

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