In a post-ironic, hyper-Orwellian paroxysm of pomposity, the reserve bank of India has warned its citizens against the dangers of using, holding and trading bitcoin. And I quote “there is no underlying or backing of any asset for virtual currencies and as such their value seems to be a matter of speculation.” Now I don’t know about you, but that’s the funniest thing I’ve heard ALL YEAR. A currency whose value is a simple matter of speculation – imagine that! In the year that saw the bitcoin doomsdayers filling column inches by the mile, the reserve bank of India may have inadvertently saved us from ourselves by cancelling (out of nowhere) their two largest denomination notes – the 500 and 1,000 rupee.
Demonetisation: who benefits?
As the criminal investigators among you will know, the most important question you can ask in your search for the truth is Cui Bono? (meaning: for whose benefit). When the Indian prime minister gave just 4 hours notice of cancellation of the two largest denomination notes – and at 8pm to boot – it was immediately obvious who was going to pay the price. In the following days ordinary Indians endured a period of total chaos, with citizens queueing for hours to exchange their cancelled notes for the newly minted replacements. Road tolls were cancelled to prevent tailbacks, and beggars largely disappeared from many city streets as ‘spare change’ became an absent phenomenon. But governments don’t do this sort of thing without a damn good reason, right?
Well actually, good reasons seem in very short supply. The official line is that counterfeiters were circulating large amounts of the cancelled notes, bypassing taxation and of course, ‘funding terrorists’ with their ill-gotten gains. Yet even a cursory investigation of the black market reveals that very little in terms of laundered wealth is held in cash. Criminals may be immoral, but they aren’t stupid. Assets are safer than cash, attract less suspicion, and are more stable in investment terms, especially considering the already perilous state of the rupee in 2016.
So what happens when you take a smartphone-armed population and punish them for apparently no good reason? They find ways to circumvent your control and influence, that’s what. They see a world where government is no longer trusted or needed to provide secure financial services. They discover bitcoin. Not all 1.2bn of them, granted, but in such a large population, even a fraction of a percentage point represents a massive groundswell of uptake for our network.
In the week following the demonetisation announcement, the Hindustan Times reported a 20-30% increase in internet searches for bitcoin, and that the popular bitcoin exchange app Zebpay passed its landmark 100,000th download. Bitcoin’s rupee valuation also shows a dramatic surge from a $20 premium some 3 months ago, to a $70-100 premium at the time of writing. Add to that the USD price threatening to break the $1,000 mark, and it’s undeniable that bitcoin is hot property right now.
The real price of freedom
So what just happened? In light of the fragile logic of the official line, it seems that there must be other reasons for this currency withdrawal. It’s no secret that many governments are planning for cashless societies. Always citing security, it’s obvious to anyone who’s looking that surveillance is the grand prize in such a system. So long as everybody plays ball.
But if your currency, government or banking system is in crisis, outcomes can be unpredictable. In a world run by big finance for the benefit of the 1%, bitcoin represents freedom to the 99%. Freedom from rampant inflation, government interference, and dependency on a system that’s always working against you. Central banks of the world would do well to watch India very closely right now, as the outcome may be a glimpse of all our futures. Hold onto your bitcoins, folks – you may need them more than ever, and much sooner than you may think.
This article represents the personal opinion of the author and is not a recommendation to buy or sell Bitcoins.