Banning cryptocurrencies in India is not the solution as this would inhibit new applications and solutions from being deployed and would discourage tech startups, the IT industry’s apex body Nasscom said on Tuesday.
An inter-ministerial committee headed by Economic Affairs Secretary Subhash Chandra Garg last week submitted the report and the draft bill on banning of cryptocurrencies and regulating official currency in the country.
“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,” it said in a statement.
A ban would handicap India from participating in new use cases that cryptocurrencies and tokens offer.
The panel in its draft report had said that for private cryptocurrencies, given the risks associated with them and volatility in their prices, “the group has recommended banning them and imposing fines and penalties for carrying on of any activity connected with them in India”.
According to Nasscom, 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,” said the IT industry’s apex body.
Conversely, a ban is more likely to deter only the legitimate operators as they have no intent to be non-compliant.
As virtual currencies and its underlying technologies are still evolving, the committee has proposed setting up of a Standing Committee to revisit the issues as and when required.
The report highlighted the positive aspect of distributed-ledger technology (DLT) and suggested various applications, especially in financial services, for use of DLT in India, the Finance Ministry statement said.
“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,” Nasscom noted.
The committee was set up on November 2, 2017 under the chairmanship of the Economic Affairs Secretary, with the Secretary for Electronics and IT Ministry, the Chairman of Securities and Exchanges Board of India (SEBI) and a Deputy Governor of the Reserve Bank of India as its members to study the issues related to virtual currencies and propose specific action to be taken in the matter.