After months of waiting, it seems India might make a decision on cryptocurrencies by the end of 2018. The finance ministry panel set up to observe the cryptocurrency market is likely to treat them as commodities, say sources.
Following Finance Minister Arun Jaitley’s announcement at the presentation of the annual budget in February this year, a wave of panic had swept the Indian cryptocurrency ecosystem. He expressed his strong distaste for cryptocurrencies during his speech, where Jaitley had stated:
“The government does not recognise cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payments system. The Government will explore use of Blockchain technology proactively for assuring in Digital Economy.”
Last year, an initial panel was set up by Narendra Modi government in April 2017 to understand and analyze the nuances of the cryptocurrency ecosystem. However, the first panel did not think highly about the virtual currency and went on to curb its impact and usage in India. A second panel was constituted in December 2017, and surprisingly, the panel’s decision is in favor of virtual currencies. The decision will come as a relief to cryptocurrency exchanges across India.
However, according to recent reports by Quartz, the decision might be delayed. An official from the panel explained:
“Blockchain is an interesting thing. We definitely want to milk it effectively for financial transactions. So all officials are really trying hard to understand how to separately use blockchain, without cryptocurrency, and understanding a new software takes time.”
The panel also includes BP Kanung, the Deputy Governor of the Reserve Bank of India [RBI], and Ajay Tyagi, the Chairman of market regulator Securities and Exchange Board of India among many others.
A senior official in anonymity gave a statement to Quartz, stating that nobody in the government intends to ban cryptocurrencies. He further added that the concern here is regulation of trades and the know-how of where the money is arriving from. Last month, Subhash Chandra Garg, the Secretary of Department of Economic Affairs and Chief of the second panel formed to examine cryptocurrencies and the fundamental technology had told ET Now, a news channel, that the draft regulations are likely to be finalized by the end of July.
The committee’s main aim is to find ways in which money laundering and illegal financing can be curbed. Shubham Yadav, the Co-Founder of Coindelta, a Pune-based cryptocurrency exchange, told Quartz:
“If a common man is involved in a blockchain that can be used to mine or validate a particular transaction then it takes resources. The investors are then incentivized by paying in cryptocurrencies, so if these digital coins are removed from the equation then it doesn’t make sense,”
Yadav also added that they are willing to work with the government to create a regulatory framework. The cryptocurrency world keeps its fingers crossed and hopes for good news.
R Gandhi, a Former RBI Deputy Governor, said that the government is likely to consider cryptocurrencies as assets rather than currencies, making it clear to investors that they are not like any other form of currency. He said in a statement:
“If these are used to settle transactions, then it acquires the nature of currency. So that is one thing that one needs to be wary of. But if people want to invest in a commodity then that is different, because then we can assume that they are aware of the risks involved.”
Representatives of the Indian cryptocurrency ecosystem have also met with the officials to provide a deep understanding of the technology. Ajeet Khurana, the Head of the Blockchain and Cryptocurrency Committee, a lobby of cryptocurrency in India, stated:
“A public blockchain needs to have a token and you can’t have it by excluding cryptocurrencies. Moreover, a public blockchain is analogous to the internet and no one can control it.”
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