Panel favours cryptocurrency ban in India

An inter-ministerial committee set up by the government on virtual currencies has proposed banning of private cryptocurrencies in India by enacting a law and imposing fines and penalties for carrying on activities related to such cryptocurrencies.

The committee headed by finance secretary Subhash Chandra Garg has proposed a draft bill “Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019", which has been placed in the public domain.

The committee has, however, taken a lenient view on the government launching an official digital currency, asking it to keep an open mind on the matter. “As virtual currencies and its underlying technology are still evolving, the group has proposed that the government may establish a standing committee to revisit the issues addressed in the report as and when required,” it said.

The committee which also had secretary MEITY, chairman Sebi and RBI deputy governor as its members has suggested the use of distributed-ledger technology (DLT) in India, especially in financial services. “The DLT-based systems can be used by banks and other financial firms for processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance and reconciliation systems in the securities market,” the report said.

The committee, which had ministry of electronics and information technology secretary Ajay Prakash Sawhney, Securities and Exchange Board of India chairman Ajay Tyagi and RBI deputy governor B.P. Kanungo as its members, has suggested the use of distributed ledger technology (DLT) or blockchain in India, especially in the field of financial services.

“The DLT-based systems can be used by banks and other financial firms for processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance and reconciliation systems in the securities market,” the report said.

The committee identifies the potential use cases for blockchain technology in areas such as payments systems including cross-border and small value payments; data identity management or know-your-customer requirements by various financial entities; insurance; collateral and ownership (including land) registries; loan issuance and tracking; e-stamping; trade financing; post-trade reporting; securities and commodities and internal systems of financial service providers.

“The advantages of using DLT are mainly seen in terms of reducing administration and transaction costs, obviating duplication and improving accuracy of data, improving the speed and efficiency of transactions and detecting fraud,” the committee said.

Implementing the ban may not be easy, though. US anti-virus software guru and crypto bull John McAfee tweeted: “India announces it plans to ban all crypto. Banning mosquitoes after a rain in the summer would stand a better chance of being enforceable.”

Former finance minister Arun Jaitley, in his February 2018 budget speech, had made the government’s stand clear on private cryptocurrrencies: “The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto assets in financing illegitimate activities or as part of the payment system. The government will explore use of blockchain technology proactively for ushering in digital economy.”