The Indian Stock markets have had a free fall in the last few weeks from around an index level of 12000 to 9000. While most people consider this as a reaction to the impact of business slowing down due to the Corona virus, it cannot be denied that there could be another reason why the fall in India is accelerated and appears disproportional to the economic impact of the Corona.
One of the reasons could be the Supreme Court decision which quashed the RBI circular that Banks should not engage themselves with the Bitcoin exchanges. This decision has been interpreted by the markets as en endorsement of the Bitcoin by the Supreme Court.
Though the Supreme Court has been clever in its judgement and has only struck down the RBI circular and not its power to regulate in the matter, it has had a chilling effect on RBI officials and encouraged those officials in SEBI and the Ministry of Finance to silently support transactions in Bitcoins.
It is possible that a large amount of investments are being moved from the Indian stock markets to Bitcons and other Crypto currencies.
This doubt is strengthened by the fact that the Ministry of Finance and SEBI has been very lethargic in controlling the bearish trend in the market and have failed in intervene in time by suspending the market operations by a few days. This should have been the normal response of a prudent regulator. But we know that SEBI has been earlier supportive of the Bitcoin exchange and MCX even submitted a recommendations to the Government to regularize Bitcoins. It cannot therefore be ruled out that the inaction of SEBI and the Ministry of Finance could be deliberate.
Mrs Nirmala Seeetharaman needs to understand that the Supreme Court judgement was an encouragement for money laundering and if this is not checked immediately there will be further drain of funds from not only the stock markets but also the Banking system.
Now the action is required from three ends.
- RBI should file a review petition on the Supreme Court order and seek an immediate stay on its operation.
- Ministry of Finance should immediately release an ordinance to pass the “Banning of Crypto Currencies” legislation.
- The CJI of India should recognize the link between black money, money laundering and the Crypto Currency exchanges and suo moto order a review of the Supreme Court’s judgement to a larger bench
I suppose the saner non corrupt elements in the Government should recognize the link between Bitcoins and money laundering and urge the Ministry of Finance to act immediately.
Further, now that the Stock markets are disproportionately low, the Government agencies should start buying out some valued companies in the private sector both for better control of the Government in the private sector companies as well as short term commercial benefit which should be better than the bond yields.
Naavi
