Measures around crypto assets to be brought this year, says economic affairs secretary

Economic affairs secretary Ajay Seth

Economic Affairs Secretary Ajay Seth said on February 4 that regulations around crypto assets would be brought in this year.

The Budget, presented on February 1, was silent on regulating crypto assets even though Indian are increasingly investing in crypto currency and non-fungible tokens (NFTs).

"The technology of crypto assets like blockchain and others can be used but its use in the financial sector can have several risks. In the course of this year, measures around crypto would be brought out," said Seth at a post-budget press conference in Mumbai.

"In India, nobody is talking about using crypto as a currency. The risks are with using it as a token," he said.

G20 and cryptocurrency

Finance Minister Nirmala Sitharaman on February 3 said she will be looking at arriving at a global SOP (standard operating procedure) for regulating crypto assets in her upcoming G20 meeting with finance ministers and central bank governors in a much-needed clarity on the way forward for the crypto sector.

In a post-budget interview with Network18 Group’s MD Rahul Joshi, Sitharaman said the central bank will be recognised as the authority to issue cryptocurrencies.

Sitharaman said, “We will be looking at global SOP to be available and agreed upon for regulating crypto assets while recognising the central bank as the authority for issuing cryptocurrencies.”

“The rest of the assets created outside that, are using very useful financial technologies, even those have to be discussed because regulations cannot be done by one country singularly, it has to be a collective action because technology doesn’t brook any borders,” she added talking about her agenda for the G20 meeting in Bengaluru to happen later this month.

On January 31, the crypto sector found a mention in the Economic Survey for the first time ever, though it was mostly to highlight the underlying risks and high volatility of the sector and the need for a global approach towards regulations.

Some of the industry players though were banking on India’s G20 presidency this year to get clarity on crypto.

RBI warnings

The Reserve Bank of India (RBI) has, time and again, highlighted that crypto, if legalised, could lead to massive financial problems.

On January 13, RBI Governor Shaktikanta Das said that crypto is poor gambling and can undermine the power of the central bank if allowed to grow unchecked.

“If crypto is allowed in India, RBI will lose control over monitoring transactions. Crypto, masquerading as a financial asset, is a completely misplaced argument," said Das speaking at an event in Mumbai.

Also, in December 2022, Das said that the next financial crisis will be caused by private cryptocurrencies, if these assets are allowed to grow. Earlier in 2017, the Union Finance Ministry, along with RBI, had issued a warning that virtual currencies are not legal tender.