Editorial: Uniform regulation needed
While the opinion may be divided on legitimising cryptocurrency, a blanket ban could be counter-productive, given the global trends in the growth of the virtual currency market. Prime Minister Narendra Modi’s call for a collective and synchronised global policymaking around the blockchain-backed digital currencies must be seen against the backdrop of conflicting policy formulations floating around to deal with cryptocurrencies and crypto exchanges. His proposal, made while addressing the World Economic Forum’s virtual gathering, that a uniform global response be formulated to deal with the digital currency market is pragmatic and deserves serious consideration. India too has been on the horns of a dilemma on how to deal with the issue, with the Reserve Bank of India taking a tough stand, dubbing cryptocurrencies as a threat to the financial system and calling for an outright ban. However, there is a need to take a balanced and nuanced approach as the technology related to cryptocurrency is still evolving. The government’s focus appears to be more on the speculation and trading side of the digital currency market. The much-awaited cryptocurrency Bill, aimed at regulating the sector, could not be tabled in the recently-concluded winter session of Parliament as the Union Cabinet is yet to give its nod to the provisions of the new law. The current version of the Bill only addresses trading in cryptocurrencies and how crypto exchanges should be regulated. There are an estimated 20 million cryptocurrency investors in India, with total crypto holdings of around $5.39 billion.
Despite being the world’s fastest growing markets for cryptocurrency trading, India has been having a hot-and-cold relationship with virtual coins. The RBI had effectively banned crypto transactions in 2018, but the Supreme Court struck down the restriction. Lured by a barrage of advertisements and rising prices for cryptocurrencies, the number of investors in crypto assets has surged in India. The government now plans to come down heavily on advertisements that seek to woo new investors. However, imposing a total ban on cryptocurrencies is neither feasible nor desirable because large investments have already been made in such instruments. There is a strong case for bringing the entire ecosystem including Non-fungible Tokens (NFTs) and cryptocurrencies, under the tax net. The Centre needs to work towards arriving at a consensus on the mechanism of regulation of these virtual assets. Last year when the government had a stronger stance on cryptocurrencies, the RBI had expressed its intent to introduce an official digital currency for India. Back then, the RBI chief said a committee was working to decide on the model of the central bank digital currency. It is not clear at this point whether the central bank would go ahead with a digital rupee if the government decides not to ban existing cryptocurrencies like Bitcoin.
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