An Indian inter-ministerial committee (IMC) has recently suggested a blanket ban on all privacy-centric cryptocurrencies in the country.
The report notes with “serious concern” the “mushrooming of cryptocurrencies,” warning that “numerous people in India investing in” digital assets that are "almost invariably issued abroad.” As such, the report concluded that said “cryptocurrencies have been created by non-sovereigns and are in this sense entirely private enterprises.”
Indian Government to Consider Cryptocurrency Prohibition
The IMC asserts that “there is no underlying intrinsic value of these private cryptocurrencies,” adding that such “all the attributes of a currency.” The report also expressed concern regarding the price volatility of cryptocurrencies, stating: “there is no fixed nominal value of these private cryptocurrencies i.e. neither act as any store of value nor they are a medium of exchange.”
The Committee is of the clear view that the private cryptocurrencies should not be allowed. These cryptocurrencies cannot serve the purpose of a currency. The private cryptocurrencies are inconsistent with the essential functions of money/currency, hence private cryptocurrencies cannot replace fiat currencies
The draft law proposes that any direct or indirect use of private cryptocurrencies by punishable with imprisonment of between one and 10 years, and fines of up to Rs 25 crore (nearly $3.63 million).
The committee is chaired by India’s Secretary of Economic Affairs, Subhash Chandra Gargas, who is also joined by the chairman of the Securities and Exchange Board of India (SEBI), Ajay Tyagi, and Sumant Prashant of the National Institute of Public Finance and Policy, among others.
Industry Representatives Speak out Against Crypto Ban
Sathvik Vishwanath, the co-founder of Indian cryptocurrency exchange, Unocoin, described warned that the recommended cryptocurrency prohibition as “drastic,” and warned that the policy would be to the detriment of Indian’s technology sector. He stated: "if the government decides to take such a drastic step then India will stand to lose out significantly on the technology front,"
Nischal Shetty, the chief executive officer of Indian exchange, WazirX, expressed hope that the government would not implement the proposed ban, stating: "Banning cryptocurrencies is a regressive step and no country or government should ban a new technology such as this."
Committee Recommends the Development of Sovereign Virtual Currency
Despite the hostile stance taken with regards to “private cryptocurrencies,” the report advocates that the Reserve Bank of India (RBI) issue a central bank-backed virtual currency, recommending that a hypothetical digital rupee and other virtual currencies backed by sovereign states be exempt from the proposed cryptocurrency ban.
Speaking of the potential benefits brought by the issuance of a digital rupee, the report states: “It can be used by banks and other financial firms for processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance, and reconciliation systems in the securities market,"
The report also offers praise decentralized ledger technology (DLT) generally, describing such as “an important and innovative technology, which will play a major role in ushering in the digital age.” However, the IMC advocates the development of a comprehensive legislative apparatus to regulate the use and promotion of DLT in India.
The IMC also recommends that the government prohibit institutions regulated by the RBI from interfacing with cryptocurrencies.