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Finance Ministry’s FinTech report discusses cryptocurrencies, but makes no recommendation on their regulation

Despite talking about cryptocurrencies briefly, the Department of Economic Affairs' (under the Finance Ministry) FinTech report did not make a single recommendation on regulating them. The Steering Committee, which authored the report, however, made 45 concrete recommendations in the report on issues such as open APIs, consumer protection, drone technology, etc. Using digital tokens Benefits of digital tokens: "Use of digital tokens resolves the issue of multiple currencies, improves liquidity and capital compliance costs." "It allows for micro-payments and expedites the payment process that eliminates liquidity risks." Token issuance, through Initial Coin Offerings (ICO) “has emerged as an innovative way of capital raising by fintech businesses". Cryptocurrency ICO statistics: According to the report, in 2018, by September 25, 2018, 790 ICOs had been issued, and total funds raised through ICOs amounted to US$20 billion [₹1,438.7 crore]. (Thus far in 2019, $366 million have been raised through ICOs, according to ICOdata.) Broad categories for digital tokens The report suggested that digital tokens can be grouped into two categories depending on the objective of their issue. Utility tokens: "They entitle future access to a company’s product or service. They can be understood as digital coupons for the service the company is developing. For example, tokens issued by a hotel service provider in exchange for deposits or investments." Security tokens: The report noted that some token issuance has the attributes of a security, referring to the U.S. SEC vs. Howey court case which established the guidelines for determining if "a financial arrangement involved an…

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