Banning all cryptocurrencies apart from the ones backed by the government is “not the most constructive measure”, industry body NASSCOM said in a statement (given below) to MediaNama. It said that a ban will only deter legitimate operators since they have no intent to be non-compliant, would discourage tech start-ups and handicap India from participating in new use cases that cryptocurrencies and tokens offer. The body suggested that developing a risk-based framework to regulate cryptocurrencies would be a better idea than putting an outright ban on them. It said that crypto businesses could be be tested in regulatory sandboxes.
The Finance Ministry has proposed a legislation that bans the use of cryptocurrency in India, and makes violations punishable with a fine or with one to ten years of imprisonment. Called the “Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019”, the bill states that “cryptocurrency shall not be used as legal tender or currency at any place in India”. It also makes promotion, advertising, any abetment in participation of use of cryptocurrency punishable with a fine, or prison term of up to 7 years. It makes a repeat offence punishable with a prison sentence of 5-10 years along with a fine.
The bill was drafted by an inter-ministerial committee chaired by Subhash Chandra Garg, secretary of the Department of Economic Affairs under the Finance Ministry. Created on November 2, 2017, the committee’s other members were MeitY Secretary Ajay Prakash Sawhney, SEBI Chairman Ajay Tyagi, and RBI Deputy Governor BP Kanungo. While banning cryptocurrencies, the committee said it would be “advisable” to have an “open mind” about introducing an official digital currency in India, and a group with DEA, RBI, MeitY, and DFS should examine the development of an appropriate model of digital currency, which would be regulated by the RBI, if it comes at all.
Here’s NASSCOM’s full statement:
NASSCOM believes that the recent proposal of the Inter-ministerial Committee of the Government to ban all cryptocurrencies barring those that are backed by the Government, is not the most constructive measure. Instead, the government should work towards developing a risk-based framework to regulate and monitor cryptocurrencies and tokens. A ban would inhibit new applications and solutions from being deployed and would discourage tech Startups. It would handicap India from participating in new use cases that cryptocurrencies and tokens offer.
To address consumer protection concerns, cryptocurrency-based businesses can be tested in the regulatory sandboxes being launched by the financial sector regulators across the country. We should work towards creating a regulatory framework that will constantly monitor and prevent illegal activities. Regulating would allow the law enforcement agencies to be better equipped to understand these new technologies, enable them to gather intelligence on criminal developments and take enforcement actions. Conversely, a ban is more likely to deter only the legitimate operators as they have no intent to be non-compliant.
Additionally, the committee’s recognition of the potential of Distributed Ledger Technology (DLT) is a welcome step towards enhancing innovation in the ecosystem. We look forward to engaging with the government in considering how DLT can be used in India, to improve transparency, access to information and citizen services.We will continue working with government stakeholders and seek more discussions on this issue.