In a recent move, an inter-ministerial committee of the government of India has recommended a ban on all private cryptocurrencies. It has also suggested imposing strict penalties on any activity related with virtual currencies. The Ministry of Finance has stated that the Government will go over the report and the draft bill attached to it. This ends the hope of many cryptocurrency enthusiasts who were hoping for a positive attitude of the Government towards the issue.
The committee, constituted in November 2017 and led by Finance Secretary Subhash Chandra Garg has suggested heavy penalties of up to $3.63 million and a jail term of 10 years for anyone dealing with virtual currencies. The report states that there are around 2116 cryptocurrencies in circulation, with a capital value of $119.46 billion. It made a clear distinction between private currencies and those backed by the Governments and central banks. The report stated that “The committee recommends that all private cryptocurrencies, except any cryptocurrency which may be issued by the government, be banned in India,”
The report made it clear that the volatile nature of cryptocurrencies make them subject to severe financial fluctuations. It also mentions that the virtual currencies have characteristics which, “create consumer protection issues, risks to the financial system and the overall economy, and can facilitate criminal activity”. It states that these currencies neither have a fixed nominal value nor an underlying intrinsic value and hence cannot replace a fiat currency.
The report adds that,” “It is essential to note that as of date no country across the world however treats virtual currencies as legal tender.” The panel, however commented on the advantages of the Distributed Ledger Technology and the positive aspects that it can bring into various financial services. It also suggested the launch of an official digital currency backed by the Reserve bank of India.
Various industry experts are not happy with the report as they feel that it is a regressive step and will result in a significant loss for the country in the technological arena. John Mcaffe, recently tweeted that.” “India announces it plans to ban all crypto. Banning mosquitos after a rain in the summer would stand a better chance of being enforceable,”
This announcement comes at a significant time when Libra, Facebook’s digital currency is set to launch in 2020. In addition, bitcoin, the largest virtual currency has shown significant rise in value in the past six months. It is now to be seen how the government acts on the report in introducing the bill in the parliament.
