Decision on inter-ministerial committee on cryptocurrencies
The recommendation of an inter-ministerial committee that India should ban all private cryptocurrencies, that is, Bitcoin and others like it, hardly comes as a surprise. The committee was under the chairmanship of Subhash Chandra Garg, the former Economic Affairs Secretary. The committee has opposed private cryptocurrencies even while advocating a central bank-issued cryptocurrency.
The inter-ministerial even recommended to draft a law that mandates a fine and imprisonment of up to 10 years for the offences of mining, generating, holding, selling, dealing in, transferring, disposing of, or issuing cryptocurrencies.
Reason for stand against cryptocurrencies
In his Budget speech in 2018, Finance Minister Arun Jaitley said the government doesn’t consider them legal tender. The Reserve Bank of India has repeatedly warned the public of the risks associated with dealing with cryptocurrencies. Bitcoin, the most prominent among them, has yo-yoed wildly in value, even over short periods of time. A May 2019 article by Bloomberg, citing data from blockchain analysis firm Chainalysis, said “speculation remains Bitcoin’s primary use case”. Its use in illegal online marketplaces that deal with drugs and child pornography is well-documented. There have been cases of consumers being defrauded, including in India.
Governments and economic regulators across the world are wary of private cryptocurrencies. As they need neither a central issuing authority nor a central validating agency for transactions, these currencies can exist and thrive outside the realm of authority and regulation. They are even deemed a threat to the official currency and monetary system.
Many countries, including Canada, Thailand, Russia and Japan, seem to be moving on the path of regulation, so that transactions are within the purview of anti-money laundering and prevention of terror laws.
China has gone for an outright ban. It is believed that India has taken adopted Chinese model on cryptocurrencies.