India May Treat Cryptocurrencies as Commodities Rather Than Ban Them
India is reportedly not going to issue a blanket ban on cryptocurrencies, but may label them as commodities, according to a source familiar with the situation.
In a report from Quartz, a senior government official, who requested anonymity, stated that they don’t think the panel set up to look into digital currencies ‘is really thinking of banning cryptocurrencies altogether,’ adding:
“The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as (a) commodity may let us better regulate trade and so that is being looked at.”
India’s uncertain relationship with the crypto market is widely known. For months the Indian government has been in discussions looking at how to handle the industry. Back in April 2017, Prime Minister Narendra Modi’s government set up the first of two committees – led by Subhash Chandra Garg, economic affairs secretary of India – to better understand the market and determine regulations for it.
In August, the committee 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. However, determining its regulatory ownership was still being questioned. In March, Shaktikanta Das, a former secretary of economic affairs, also said that it would be difficult to regulate cryptocurrencies.
The second committee was later established, with Garg stating that steps were being taken to ensure that digital currencies become illegal in its payment system. It was also working at appointing a regulator to oversea unregulated crypto exchanges that trade in digital assets in India.
During Jaitley’s budget speech at the beginning of February, he stated 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.’
Earlier reports have indicated that cryptocurrencies such as Bitcoin won’t become legal currency in India without regulation. Last month, Garg was reported on news channel ET Now as saying that draft regulations for cryptocurrencies would be discussed in the first week of July and wrapped up ‘within the first fortnight of July.’
With the possibility of India treating cryptocurrencies as commodities, this may make people realise that they aren’t a currency. R Gandhi, a former RBI deputy governor, said in the Quartz report: “If these are used to settle transactions, then it acquires the nature of currency. So that is one thing that one needs to be wary of. But if people want to invest in a commodity then that is different, because then we can assume that they are aware of the risks involved.”