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WHO'S THE BOSS?

Indian parliamentary panel agrees on cryptocurrency regulation but isn’t sure who should be in charge

Representations of Bitcoin and other cryptocurrencies on a screen showing binary codes are seen through a magnifying glass
Reuters/Florence Lo
  • Mimansa Verma
By Mimansa Verma

Reporter, Finance and Economy

Published

In a first, India’s parliamentary standing committee on finance has reportedly come to the conclusion that cryptocurrencies cannot be stopped, though they need to be regulated.

This is in contrast with the government’s earlier attempts to ban the use of digital tokens.

The parliamentary panel yesterday (Nov. 15) met representatives of crypto exchanges, Blockchain and Crypto Assets Council (BACC), among others, for a deeper understanding of the issues involved and the business. This was the first such meeting.

While they agreed that a regulatory mechanism was necessary, none of the stakeholders could decide who must take the onus of regulating the swelling cryptocurrency ecosystem in India.

“…largely they agreed that there cannot be a blanket ban. But many concerns were raised and everyone agreed on the need to regulate it,” The New Indian Express newspaper quoted its source, who was present at the meeting.

“But there were many queries which remained unanswered. The most important was if regulated, who will be the regulator of the sector which is neither currency nor traditional trade, not just technology,” the source said.

Indian government’s U-turn on “private cryptocurrency”

The much-awaited Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, has been on the cards for almost a year.

The law was earlier intended to “prohibit all private cryptocurrencies in India.” But certain exceptions will be permitted to promote the underlying technology of cryptocurrency—and its uses—according to the Lok Sabha bulletin (pdf) released in January.

Meanwhile, the burgeoning popularity of virtual tokens in India has caught the fancy of urban Indians, as well as millennials in tier-2 and -3 cities. At yesterday’s meeting, experts said cryptocurrencies were some “sort of investors’ democracy.”

While there is no official data, industry estimates show up to 6 lakh crore rupees ($80.5 billion) cumulatively having been invested already by resident Indians in crypto assets.

The Reserve Bank of India (RBI) Governor Shaktikanta Das, however,  believes this number is “highly exaggerated.” He has voiced concerns that such investments may cause a threat to India’s financial stability and its macroeconomy.

The parliamentary panel meeting assumes significance as prime minister Narendra Modi led a review meeting on the digital currency on Nov. 13, where the government decided to proactively engage with experts and other stakeholders on the evolving ecosystem.

“The meeting was more to hear the industry out and also express concerns on how issues such as how foreign exchanges can be treated, how investor protection be taken care of, and how fringe players can be removed, etc.” the Financial Express newspaper quoted its source.

Investor security is a major worry, especially amid increasing instances of fraud in the ecosystem. The panel members expressed concern over full-page cryptocurrency advertisements in newspapers and the promotion by celebrities and social media influencers.

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