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The world is moving towards a big recession, and the recent banking crisis in India testifies it. In a span of a couple of years, several banks in India have either lost a significant amount of money or have shut down completely. The country is now the highest NPA ratio in the world, and the situation seems to be moving bad to worse.
In another shocking development on Thursday evening, the Reserve Bank of India, the country’s banking regulatory authority, imposed a moratorium on withdrawals from Yes Bank, one of the top private sector banks in India. Subsequently, long ques of account holders were seen outside the 1000+ Yes Bank branches and over 1800 ATMs.
Last year, the PMC Bank faced similar measures from the RBI, and unfortunately, the bank is currently under liquidation. Yes Bank seems to be on a similar path, though the government promises that account holders will not lose their money.
In short, the situation of banking in India is gross and is deteriorating by the day. On Friday, SENSEX saw a drop of more than 893 points, as the markets witnessed lost 2.32%. Yes Bank share prices were down by more than 54%, while its market cap crashed by more than 85%, sending shockwaves throughout the Indian financial sector.
Sadly, the common investors and depositors suffer the most every time, and there doesn’t seem to be any remorse for them. However, this state of utter despair can be the opening for the crypto industry, or at least people might start thinking about investing in digital assets. Here’s why:
Decentralization & Transparency
One of the major reasons behind the failure of the big banks is the fraud and financial irregularities committed by the core group that controls all finance-related activities. Account holders and general investors have little clue about where the bank is putting their money, or to whom the bank is sanctioning the loans. They have no choice but to believe in whatever the bank says, and when everything is said and done, dreams are shattered.
Cryptocurrencies thrive on decentralization and transparency. There’s no group that controls the market, which eliminates the possibilities for manipulations, misappropriations, misrepresentations, and fraud. The underlying blockchain technology functions on a mechanism that ensures maximum transparency, which prevents any kind of irregular behavior by the companies. Therefore, the trust-less mechanism of the crypto industry could be just what the Indian investor needs.
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Of course, nothing is perfect, and we have witnessed, like in the case of QuadrigaCX, that crypto companies can be fraudulent as well. However, the impact and possibility of a crypto fraud are quite low.
Digital Economy
India has a booming market for internet consumption, and therefore, digital payments have made a big leap in the country. Yes Bank itself was pioneering this segment prior to getting caught in all the wrong things. PhonePe, an ultra-popular digital payments platform powered by Yes Bank, stalled completely after the RBI’s announcement to supersede the bank’s board.
In the form of crypto payments, users have a robust and ready alternative to the traditional digital payment systems. Crypto payments are fast, secure, and easy to use, and these qualities are what made platforms like Paytm, PhonePe, GPay, etc. so famous in India.
Also, as the use cases for crypto are expanding at a brisk rate, merchant payments via digital currencies can soon be the norm in India. Investing in crypto thus becomes a viable substitute for saving money in banks, and not having at the time of emergencies.
Minimum Interference
In a traditional monetary system, authorities like the government or the RBI, or SEBI have a big influence, which more often than not, turns into interference. If the RBI wouldn’t have intervened, there wouldn’t have been a cap on withdrawals, and in this day & age, a more feasible and favorable option could have definitely been found.
Fortunately, that’s not the case with the crypto industry. The government or any other agency has absolutely no control over curbing or expanding the flow of value. At most, the RBI can ban the use of crypto, but your wealth will always be intact. It will never happen that RBI or any other government agency prevents you from withdrawing or transferring funds from your crypto wallet.
There have been instancing, especially during the PMC Bank crisis, that people couldn’t pay for medical expenses as their wealth was locked in the bank accounts. There were at least 10 deaths reported, which were directly or indirectly related to the PMC Bank incident.
Increasing Flexibility
One of the many reasons that the crypto industry could not attract traditional investors convincingly is the fact that it was rigid in terms of investment options, especially when compared to the traditional markets. However, the situation seems to be improving steadily, and we now have a plethora of products based on digital assets to choose from.
Apart from the regular buying, selling, and holding, we now have futures contracts, margin trading, staking, loans, and many such options in the crypto industry. Major companies like Binance, TRON, Coinbase, Huobi Global, etc. are now providing a plethora of investment and other financial crypto products to their customers, which will attract a wider range of investors from the traditional side of things.
Banking sector at large is on fire in India, as the country’s largest commercial bank, State Bank of India witnessed a 6.5%+ price drop on Friday, after news surfacing that the government has directed the state-owned BFSI to buy shares in Yes Bank. This is a bet that might bring disastrous results, and general investors are aware of it. Thus, introducing crypto projects at such turbulent times for the traditional sectors will give cryptocurrencies a big chance to thrive.
What is Necessary for the Industry to Take Care?
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First of all, the industry should create crypto awareness among the masses, preventing the scammers from taking advantage of this vulnerable situation. Secondly, the biggest challenge for the industry will be to make people buy digital tokens, and hold them for an extended period or use them as the way they use traditional money. This will create an ecosystem, where cryptocurrencies will remain in circulation, rather than being sold from when holder to another. Another area that the industry must necessarily focus is providing right options to the people. Something which they can use initially to build trust, and then jump into the action no holds barred.
The current global scenario is quite depressing, with economies crashing down, fascism raising its head in several countries, and if that wasn’t bad enough, Coronavirus has scared the life out of people around the world. This, in fact, is what Satoshi Nakamoto created Bitcoin for, becoming the lifeline of the people when the systems controlled by the elite fall and falling it is!
