The central government’s stand on cryptocurrency recently went from “regulation” to “blanket ban”. The record of discussion of the Inter-ministerial Committee (IMC) released its recommendations stating that the change of heart was brought about due to objections from the various regulator.
Under the chairmanship of Economic Affairs Secretary Subhash Chandra Garg, the committee initially pushed for accepting cryptocurrencies or virtual currencies as an economic phenomenon, arguing regulation would be more beneficial than imposing a blanket ban.
During the first meeting held on the November 27, 2017, the committee agreed that the decision to ban the use of virtual currencies would be challenging to implement and could even drive some operators underground. The minutes of the meeting also detailed a “blanket ban” could encourage the use of virtual currencies in illegitimate purposes.
According to a report by the Business Standard, the committee initially wanted to focus on determining risks and regulatory challenges and whether it needed to be classified as financial assets or commodities.
However, in the second meeting held on February 22, 2018, the committee deliberated on various issues, including how to determine the true nature of crypto assets. The meeting took place after Finance Minister Arun Jaitley presented the Union Budget for 2018-19. After the Finance Minister stressed that the government would not consider virtual currencies as legal tender and was taking measures to eliminate crypto assets, the regulators pushed for imposing a complete blanket ban on cryptocurrencies like bitcoins.
Despite opinions favouring a ban from RBI Deputy Governor B.P. Kanungo and the-then Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra, Garg seemed unconvinced. The Secretary (EA) cited South Korea as an example, which rolled back its decision on banning cryptocurrencies. The Economic Affairs Secretary suggested that using cryptocurrencies in payment could be outlawed but not be prevented in its entirety, considering the nature of technology.
Ministry of Electronics and Information Technology Secretary Ajay Prakash Sawhney also exhibited an open attitude towards virtual currencies. The second meeting concluded in two sets of documents, one calling for regulations and the other for an outright ban.
However, in the concluding meeting, which was held after a gap of almost one year, the committee agreed upon a draft law imposing a blanket ban on virtual currencies. India Today quoted from the report, “As for private cryptocurrencies, given the risks associated with them and volatility in their prices, the Group has recommended banning of the cryptocurrencies in India and imposing fines and penalties for carrying on of any activities connected with cryptocurrencies in India.”
The agreed-upon draft law imposing a complete ban also took into account global developments and interactions with stakeholders. However, the IMC specifically defines the word “cryptocurrency” in the draft bill separating it from digital rupee and digital foreign currencies. The Inter-ministerial Committee has also proposed setting up a Standing Committee to re-examine the cryptocurrency-related matters.