In early February 2018, India’s Finance Minister Arun Jaitley said that the Indian government was for the idea of utilizing the blockchain technology. Big Indian banks such as Kotak Mahindra, ICIC and SBI have already started using blockchain technology in their operations. In December 2017, there was news that the government had even put plans in place to introduce a new cryptocurrency which will go by the name Lakshmi.
Even though the government is for the blockchain, the Finance Minister said that the government will do everything it can to stop crypto-assets like Bitcoin from trading in India in illegitimate activities. The minister added that the government will also explore the use of blockchain technology for ushering in the digital economy.
Blockchain and cryptocurrency Committee of IAMAI commented on the Finance Minister’s statement by saying that the position taken by the Indian government is similar to that taken by a larger number of governments around the world. The committee added it’d take the minister’s statement neutrally. The committee further stated that it understands only currency notes and coins are legal tender. Assets such as gold, bonds and stocks are not legal tenders. However, it would be irresponsible for anyone to extrapolate that such assets are ‘illegal’. The committee, however, reiterated its commitment to supporting any regulation that the government introduces to help it eliminate crypto-assets as part of the payment system.
Government’s plan to regulate Bitcoin and altcoins by the end of 2018
During the Mint event on Budget 2018, Subhash Chandra Garg, Secretary, Department of Economic Affairs, said that the department hopes to finalize its cryptocurrency-related recommendations in 2018. According to Subhash, the recommendations would then require legal changes and regulatory assignments but he hopes all the regulations will be in place by the end of 2018 financial year.
The decision to form another interdisciplinary committee to develop a framework on how to regulate cryptocurrency seems to be a step back by the government. A committee was formed in April 2017 and was made up of members from DEA, MHA, SBI, and RBI. It submitted its report in August 2017. The committee met with leading Bitcoin exchanges in the country as well as industry experts like the American Blockchain Council. In its report, the committee proffered to ban cryptocurrency.
The Finance Minister reiterated in December 2017 that the government had not legitimized Bitcoin or any other crypto. According to the minister, the already existing cryptocurrency exchanges have been self-setup and self-regulated, and don’t follow standard KYC guidelines. The exchanges also don’t keep records of transactions. According to the minister, all transactions taking place legitimately will be regulated to make them transparent once the rules are put in place.
It will not be an easy task for the government
According to Shaktikanta Das, a former secretary of economic affairs, regulating cryptocurrency would be a tough task for the government. Das was the chair of the first panel which was set up in April 2017 to look into the cryptocurrency issue. Bitcoin or other cryptocurrencies cannot be regulated effectively because digital currency transactions are done from inside private homes hence hard to monitor, he added. Given that it is only RBI which has the mandate to issue currency in India, transacting in cryptocurrencies is illegal, he stated.
China and South Korea share India’s apprehensions. In fact, in 2017, China shut down the country’s crypto exchanges which contributed to around 90% of total global volumes. In early 2018, South Korea introduced harsh Bitcoin regulations. Japan, on the other hand, passed a law in March 2017 which allowed e-currency payments and also declared them assets. According to Anirudh Rastogi, managing partner as a law firm TRA, it would be very hard to enforce a ban on cryptocurrency in India. If two or three of the world’s largest economies are legitimizing cryptocurrency, India needs to take a hard look at it before taking any drastic step, he cautioned.