India is seeing the first signs of an anticipated brain drain, as the government mulls stark legislation that would criminalize domestic cryptocurrency investments.

A Sept. 16 Economic Times report has taken the measure of industry sentiment on the ground, as a proposed blanket ban — currently still in the form of draft legislation — awaits its formal review process by lawmakers.

“The first large democracy” to ban crypto

As the Economic Times notes, the draft Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019 has proposed a 10-year prison sentence for anyone who "mines, generates, holds, sells, transfers, disposes of, issues or deals in cryptocurrencies.”

The severity of the proposed penalty and the extreme position reflected in the document — whether or not and in what form it eventually becomes national law — is already prompting local crypto businesses to take pre-emptive measures to protect themselves.

Rahul Jain — an employee at formerly domestic exchange Bitbns — told the Economic Times:

“As a startup from India, we always wanted to serve from India, but this recent complication has made it difficult for domestic crypto exchanges to operate their businesses in India. So, we are now an Estonia-based company, and any Indian law to criminalize crypto will not impact us.”

Nischal Shetty, CEO and founder of well-known Indian exchange WazirX has meanwhile argued that the proposed bill is poised to erode the wealth of over five million Indians who own “crypto assets worth thousands of crores.”

The executive said that the arbitrary decision to criminalize crypto-asset investment would destabilize existing businesses that have been operating legitimately and make the country an unfortunate pioneer in its role as “the first large democracy to ban an innovative technology such as crypto.”

Missing out on a $10 trillion industry

While local opinions differ as to whether or how the bill will evolve into a definitive statutory shape, the Economic Times’ sources were unanimous in viewing the summer’s developments as a retrograde move for the country. Shetty said:

“As a country largely reliant on the services sector, India will lose its edge as a technological power if the ban on crypto is enforced. Shunning this industry will mean massive job losses and a brain drain [...] Crypto is predicted to be a $10 trillion industry in the next five years, and if we are to achieve our Prime Minister’s goal being a $5 trillion economy, then crypto is integral to that vision.”

As reported this August, Sidharth Sogani — CEO of crypto and blockchain research firm Crebaco Global Inc —- has forecast that India will lose around $12.9 billion worth of market if cryptocurrency is eventually banned in the country.