Indian authorities have been struggling to grasp the crypto phenomenon for quite some time now – years, to be more precise. The inability to fully understand it and put it under control has resulted in a state of semi-denial: “it’s illegal”, officials repeat tirelessly, but also keep trying to tax it. It doesn’t help when someone previously charged with proposing regulations, now says – India just can’t regulate bitcoin.
The institutional antipathy towards cryptocurrencies is no secret in India. Multiple warnings have been issued against their use, many officials have declared that they are illegal. The fact of the matter is cryptos, like bitcoin, are neither banned, nor regulated in the country.
In February, media reports suggested that the roles of various regulators had been determined, but a comprehensive regulatory framework has not been introduced yet. Two committees, set up by the Finance Ministry, have attempted to understand cryptocurrencies and recommend regulations. The first has advised against allowing their use in the country, while the current one is still mulling over different options on the table.
Shaktikanta Das, who headed the panel formed in April last year, now thinks regulating cryptocurrencies would be a tough task. Regardless of the regulations, Indians will be making transactions from their houses, he said, quoted by Quartz. “You cannot enter every home to check what transactions are going on”, Das added. Recognizing the “serious challenge”, the former high-ranking Finance Ministry official addressed Indian authorities with a new suggestion:
Let’s accept that it would not be possible to regulate it effectively.
Das is an influential financial figure in India and his opinion is important when it comes to decision-making in Delhi. He has held several key positions at the Finance Ministry, serving as head of both the Department of Revenue and the Department of Economic Affairs. Currently, Shaktikanta Das is a member of the finance commission tasked with reviewing the government’s financial situation. In November he was appointed as India’s Sherpa to the G20 until the end of 2018.
Previously, the financial expert has spoken against the legalization of cryptocurrencies, pointing out they have no asset base. India’s fiat currency, the rupee, is guaranteed by the Reserve Bank, while cryptos are created “out of thin air”, he said in an interview last spring. “The fact that only the RBI is allowed to issue currency also makes transacting in cryptocurrencies illegal in India”, Das insisted. He also argued there was no legal provision backing up crypto transactions and referred to cryptocurrency as a “serious threat to the financial stability” of India and the developed world.
Presenting Budget 2018 last month, Finance Minister Arun Jaitley reiterated a well-known official position – cryptocurrency is not recognized as legal tender in India. He said the government in Delhi will take all measures to eliminate its use in financing illegitimate activities. In the meantime, commercial banks have taken measures to curb crypto-related transactions, and cryptocurrency exchanges have been targeted by financial authorities. The state, however, seems eager to tap into private crypto income and profits. In February India’s Income Tax Department issued notices to at least 100,000 cryptocurrency investors, as news.Bitcoin.com reported.
Despite the pressure, the Indian crypto sector is continuing to grow. According to a recent study, new crypto-related jobs in the country have increased almost 300 percent in a period of six months last year. A poll suggested that Indians are optimistic about the future of cryptocurrencies in their country. Ordinary people have also found alternative ways to acquire cryptos from abroad.
Some experts say it would not only be hard to regulate cryptocurrencies like bitcoin, but also impractical to write them off completely. “That would work very well if the global financial community was moving that way. But since it is not, it is going to have an adverse impact on India’s financial system”, Anirudh Rastogi, managing partner at the law firm TRA, told Quartz. If two or three of the largest economies are giving it legitimacy, one needs to take a hard look at it before taking a drastic step, he added. Measures to curb cryptocurrencies could instead encourage illegitimate transactions, the lawyer warned.
Do you believe the government in Delhi will eventually change its hardline position towards cryptocurrencies? Share your thoughts in the comments section below.
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Written by Lubomir Tassev