Chennai: The ban proposed by an Inter-Ministerial panel on private cryptocurrencies is backward-looking and a setback for companies mulling to launch their own virtual currencies on the lines of Bitcoin, said experts.
The panel headed by Economic Affairs Secretary S C Garg, in its report made public Monday, recommended banning of private cryptocurrencies and criminalising any activities related to virtual currencies.
This made dealing in Bitcoin, Ethereum and the likes problematic as it may land one in jail. The committee has recommended heavy penalties of up to Rs 25 crore and a jail term up to 10 years for anyone who mines, generates, holds, sells, transfers or issues cryptocurrency.
The panel’s recommendations along with the draft legislation, Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019, was put up on the website of the Department of Economic Affairs on Monday.
The development comes at a time when Facebook is set to launch its digital currency, Libra, next year. In the past six months, Bitcoin posted a threefold rise in value and was worth $13,880 the same day last month. Although it has dropped, it was still valued at $10,200 as of Monday.
The panel, however, pitched for introduction of an official digital currency with a status of a legal tender and appropriately regulated by the Reserve Bank of India.
“…the proposal by a government panel to ban crypto is backward looking. Bans don’t serve much purpose and only drive users to try and circumvent the law. Bans also hamper productive innovation and risk leaving the country behind if crypto indeed evolves to become a bigger part of the financial system over time,” said founder and CEO, mPokket, Gaurav Jalan.
Prashant Phillip, partner, Lakshmikumaran & Sridharan Attorneys, too expressed a similar opinion if the ban is imposed, it would be a severe setback for private corporations which had planned to introduce their own versions of cryptocurrencies in India.
“Previously, China had also completely banned the use of cryptocurrencies. With the proposed ban, it remains to be seen whether other nations would follow the same,” he said.
Rachit Sharma, DGM, Taxmann, said the recommendations is in line with the models of Financial Acton Task Force, an intergovernmental organisation.
“FATF’s report on virtual currencies advocates on risk based supervision of the crypto currencies as they are very vulnerable to money laundering and terror funding activities due to existence of greater anonymity in crypto currencies,” Sharma said.
However, Prashant Garg, partner, Data and Analytics, EY India, said the proposal does not affect the industry at large which is leveraging blockchain technology for positives. EY has been focusing and will continue to promote Digital Twins and Distributed Ledger Technology (DLT) backed by fiat money, he said.
“The regulation takes India away from speculative use of technology and paves way for beneficial use of technology and thereby propagates a trusted, auditable, secure digital business ecosystem. There are many positives with the move and certainly it help in breaking the perception that DLT/Blockchain is Cryptocurrency or vice versa,” he said.
Besides Bitcoin, several other cryptocurrencies have emerged in the market. As of now, there are around 2,116 cryptocurrencies, with a market capitalisation of $119.46 billion.
| Bits & Pieces |
| * If the recommendations by the government-appointed panel are accepted, its draft report, the ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019,’ mandates a fine and imprisonment of up to 10 years for offences.* The Reserve Bank of India (RBI) in July last year had already issued a ban on cryptocurrencies. However, the committee chaired by Economic Affairs Secretary Subhash Chandra Garg suggested the government to keep ‘an open mind for a certain bank digital currency’ which is based on the similar blockchain or distributed ledger technology (DLT).
* Few other cryptocurrencies that have emerged popular other than Bitcoin are – Ethereum, Ripple and Cardano. |
| Where is it legal? |
| A few countries have recognised digital currencies as mode of payment. However, it is not allowed as legal tender anywhere in the world. China has banned these currencies but there is an exception if it is traded for the purpose of other goods and services. Russia too follows the same route. However, Japan, Thailand and Switzerland have recognised them as a means of payment. |