The Minister of State in Ministry of Finance, Shri Pon. Radhakrishnan fielded a few questions on cryptocurrencies in the Lok Sabha (lower house of the Indian parliament) on December 28th, 2018. The questions were posed by Feroze Varun Gandhi, Kunwar Bharatendra and Arvind Sawant jointly.
The questions asked were:
- The stance of the Government on the legality of trading in cryptocurrencies;
- The details of the composition of the panel established to draft regulations to govern cryptocurrencies and the recommendations made by the panel and the timeline for the expected release of the regulations;
- Whether the Government has conducted any awareness campaigns to warn the general public of the speculative risks of such cryptocurrencies and taken measures against its misuse for money laundering and terrorist funding, if so, the details thereof and if not, the reasons therefor;
- Whether the Government has been keeping a track of the value of cryptocurrencies traded by Indian Nationals within the Indian territory, if so, the details thereof; and
- Whether the Government is considering to introduce its own form of cryptocurrency in place of Bitcoins and proposes to bring any license and authorization to any entity or company to operate such schemes or deal with Bitcoins or any virtual currency and if so, the details thereof?
We were initially happy to see the issue of cryptocurrencies being raised in the Indian Parliament. However, the questions asked by the ministers again indicated that they do not fully understand and appreciate the innovation that cryptocurrencies bring to the table. The questions have once again spoken about speculative risks and misuse
Here are the responses to these questions:
Allowing cryptocurrency trading still under examination
Shri Radhakrishnan answered that the Indian government does not
Our take: Cryptocurrency trading is still very much active in India. So, how does allowing that come into question? We think the right word here is regulation, which has been under examination for many months now.
No set timeline for cryptocurrency regulations in India
The IMC is still working on a framework to regulate cryptocurrencies. They minister then cited that the ‘absence of a globally acceptable solution’ and the need to devise a ‘technically feasible solution’ has meant that the IMC is proceeding with due caution. The answer also stated that it is difficult to set a timeline to come up with clear recommendations.
Our take: We are not quite sure what the government means by globally acceptable solution when countries like Japan and Thailand have shown the way. We are also not clear on what the government means by a technically feasible solution. All we know is that cryptocurrency regulations may take a long time to come in India.
The government warned users about the ‘dangers’ of cryptocurrencies
The minister cited RBI’s multiple warnings about the risks involved in trading cryptocurrencies. He also mentioned that the RBI cautioned the public about risks and dangers with Virtual currencies including potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to by investing in Bitcoin and/or other Virtual currencies. He then cited the RBI banking ban which came into effect from July
Our take: Which ‘scheme’ is he exactly referring to? We are not quite sure! The answer clearly shows that the government is still stuck at the same conservative mindset around cryptocurrencies and they haven’t engaged with any cryptocurrency or blockchain expert to understand the fintech innovation.
The government has not been keeping a track of cryptocurrency trading in India
The answer to the fourth question was a simple – “No, Sir.”
Our take: If the government was not keeping a track on the value of cryptocurrencies being traded by Indian citizens, how do they know that it is being used for money laundering and terrorist financing? In addition, if the government wasn’t keeping a track on cryptocurrencies, why were income tax notices sent out to Bitcoin traders last year? And finally, if the regulators weren’t keeping a track on cryptocurrencies, why are they so convinced about its ‘dangers’?
A state-backed digital currency maybe on the cards
The IMC is examining the pros and cons of issuing a state-backed cryptocurrency. However, no decision regarding the issuance or the entities involved has been taken yet.
Our take: Why does the government even want a state-backed digital currency? Aren’t platforms like Paytm and UPI good enough for digital, cash-less transactions. If the government is convinced about the power of blockchain technology and cryptography, shouldn’t they be then allowing independent cryptocurrencies? And even if India launched a state-backed cryptocurrency, which blockchain will they use?
As usual, the government response only indicates that no serious effort has been taken to understand or learn about cryptocurrencies. The government keeps going back to the same old money laundering and terrorist financing argument when they clearly haven’t even kept track of cryptocurrency trading in India. It is sad to see the opportunity of a truly ‘Digital India’ being wasted like this!
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