Parliamentary Panel meeting: Regulate crypto, don't ban, say House members

Within days of Prime Minister Narendra Modi chairing a meeting on the future of cryptocurrency, a parliamentary panel on Monday favoured regulation rather than imposing an outright ban. The winter session of Parliament starting on November 29 is expected to take up the draft bill on regulating cryptocurrency.

This is the first meeting on the subject that was convened by the Parliamentary Standing Committee on Finance.       

The Parliamentary Standing Committee meeting chaired by BJP leader and former minister of state for finance Jayant Sinha on Monday discussed the pros and cons of crypto finance with several stakehol­ders. Sources in the know said many members said the crypto currency exchanges should be regulated and that an outright ban would not be the right approach.

The committee had also discussed issues related to crypto finance with associations and industry experts.

Sources aware of the discussions of the committee said the meeting was a positive first step towards understanding cryptocurrencies, and a majority of the members were in favour of putting in regulations instead of implementing a ban. 

The meeting took place against the backdrop of rising concerns in various quarters about crypto currencies and the possible risks emanating from trading in them, especially since there is a growing interest in such assets worldwide. Currently, there are neither specific regulations nor an outright ban on use of crypto currencies in the country.

Last week RBI Governor Shaktikanta Das had said at an event that the central bank was cautious on cryptocurrency. As a central banker, we have serious concerns about it and we have flagged it many times,’’Das had said. At the PM-led meeting a few days ago, the consensus was that the government must take a forward-looking and progressive step on the matter while putting in firm regulations.   

Sinha told a TV channel after the meeting, "Today's taxation framework is very capable of handling crypto tokens and crypto finance. We have to decide on the many functions that crypto finance can fulfil, where do we bucket different aspects of crypto finance..it can serve as an asset, security, commodity, payment system. The underlying technology has many broad manifestations." 

Once the broad bucket under which this falls is decided, taxation would become easier, he added.

Representatives of crypto exchanges, block chain and Crypto Assets Council (BACC), industry bodies as well as academicians and other stakeholders submitted their views before the panel.

Some Congress members in the panel told PTI that there are significant challenges in banning crypto currencies. The broad view of the panel was that a Chinese wall should be put in place on crypto currencies' fungiblity in the real world and its interface with the real world should be regulated, they added.

According to sources, questions were raised on the advertisements run by certain crypto exchanges, but the members largely agreed that putting in place a body to oversee regulations was the way forward.

The focus of the discussion was to understand the infrastructure, business and economic impact of cryptocurrencies, they added. On March 4, 2020, the Supreme Court set aside an RBI circular of April 6, 2018, prohibiting banks and entities regulated by it from providing services in relation to virtual currencies.

A draft legislation, Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019, was also put in the public domain in July 2019. On February 5, 2021, the central bank instituted an internal panel to suggest a model for the central bank's digital currency.

The RBI had announced its intent to come out with an official digital currency amid proliferation of crypto currencies about which the central bank has concerns.