What has been a speculation for quite some time, has now been officially confirmed. The Indian government’s Inter-ministerial Committee (IMC) which was appointed to study the issues related to virtual currencies (VCs) has submitted its report along with a draft bill to the Government. In this report, the committee has suggested banning private cryptocurrencies in India.
This committee was constituted on November 2, 2017, under the Chairmanship of the Secretary (DEA) and comprised of Secretary (MeitY), Deputy Governor (RBI) and Chairman (SEBI). In its report, the committee has highlighted the positive aspects of Distributed-Ledger Technology (DLT) but has shown concerns over the use of cryptocurrencies.
The IMC report states, “The DLT can be used by banks and other financial firms for processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance, and reconciliation systems in the securities market.” The DLT (or Blockchain technology) is the technology underlying operations involving cryptocurrencies that allow the recording, sharing, and transfer of data or value without the need for a central record-keeping, unlike a traditional ledger.
It should be noted that the Committee’s report is focused on digital currencies and the underlying technologies which haven’t been issued by governments. Because these non-official VCs can be used to fraud customers and investors, the report states. Along with a ban on VCs, IMC recommends imposing fines and penalties for carrying on of any activities related to cryptocurrencies in the country.
In the report, the Chairman of CBDT has favored banning VCs saying that “VCs create a chain of black money”. Also, people uninformed about VCs can be lured into buying them without knowing the risk associated with those digital currencies. While the Secretary of Meity says that being a large economy and a developing technological nation, India should keep an open-minded approach towards digital currency and develop its prospects accordingly.
Also, IMC has recommended that the Government should establish a Standing Committee ‘to revisit the issues addressed in the report as and when required.’
The draft bill ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019’ and the report will be examined in discussion with all the concerned Departments and Regulatory Authorities before any firm decision is taken by the Government.