India’s relationship, or lack of, with the cryptocurrency market, is well known. Yet, even as the country struggles to decide whether it should attempt to ban them or not, one former finance ministry official has made the argument that they shouldn’t be permitted.
In a report from Quartz, Shaktikanta Das, a former secretary of economic affairs, thinks that regulating the digital currency market would be a difficult undertaking.
“Let us accept that it would not be possible to regulate it effectively,” he explained. “Because they will do transactions from their houses. You cannot enter every home to check what transactions are going on. So, I think this is a serious challenge, and this should not be allowed at all.”
It was back in 2013 that India’s central bank, the Reserve Bank of India (RBI), issued a warning to investors about the risks they faced trading in the crypto market, including security-related risks. These warnings were later echoed last February. However, despite the government’s aversions to cryptocurrencies it doesn’t appear to have stemmed the tide of interest from investors.
In a bid to understand the market better and determine regulations for it two committees have been set up by the finance ministry. The first, which was established in April 2017, saw Das heading it. In August, the panel submitted its report to Arun Jaitley, India’s finance minister. At the time, it was reported that cryptocurrencies were ‘unlikely’ to be declared illegal in the country. When it came to determining its regulatory ownership questions still remained.
The second committee, headed by Subhash Garg, the current secretary, is taking steps to ensure that digital currencies are illegal in its payment system. However, it’s looking at appointing a regulator to oversee unregulated crypto exchanges that trade in digital assets, according to a report from Reuters. It’s expected that the panel will submit its report in the current fiscal year, ending the 31st March.
While some have said that bitcoin won’t become a legal currency without regulation, Jaitley declared in his budget speech at the beginning of February that the government ‘does not recognise cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payments system.’
In Das’s opinion the issue with digital currencies is that there is no asset base, adding:
“Currencies have the guarantee of the RBI, on behalf of the sovereign. That is the underlying guarantee for that. Share of a company – you have an underlying asset of the company. In cryptocurrencies, what is the asset base? It is created out of vacuum, it is created out of thin air.”
China, too, shares the same feelings as India. Last September, the country’s government banned domestic digital currency exchanges, with rumours that Chinese bitcoin miners and mining pool operators were considering relocating to countries such as Russia, Thailand, and the U.S. Now, however, China is going one step further and has vowed to restrict traders from using cryptocurrency websites in Western nations.
India, though, needs to determine what definitive approach it is taking. Will it follow China or Japan? Will attempting to curb cryptocurrencies simply push the market underground, making the tracking of transactions harder to maintain?