Former Finance Secretary Subhash Garg suggests 3 laws to regulate India’s crypto market

Garg had headed the inter-ministerial committee on virtual currencies in 2019 that had proposed a ban on cryptocurrencies like Bitcoin.

Introduction of the crypto bill was deferred in the winter session of Parliament. (Image: IE File)

The concern over cryptocurrencies being a competitor or threat to the rupee reflected in the legislative agenda for introduction of the crypto bill in the Budget session and Winter session last year indicated that the government possibly has not been able to figure out a solution for dealing with cryptocurrencies, said Former Finance Secretary Subhash Chandra Garg on Tuesday. Suggesting three different laws to regulate the crypto market in India, Garg noted that with the government getting sensitive to the aspect of crypto assets and that a lot of Indians have invested in cryptos, a complete ban on the entire crypto would not be in order.

“The government and Reserve Bank of India (RBI) have not moved materially from their original concern that they had for the cryptocurrency in a way being a competitor or threat to the rupee. This was what reflected in those three lines (legislative agenda to introduce the crypto bill). This indicates that the government has still not taken note of the wider ramification (of cryptos) in the wider world,” said Garg in his address at the Digital Currency Conclave by Financial Express.

Garg had headed the inter-ministerial committee on virtual currencies in 2019 that had proposed a ban on cryptocurrencies like Bitcoin others even as at a webinar in July 2020 organised by Credit Rating for Exchanges, Blockchains and Coin Offerings, Garg had said that government should regulate crypto as an asset or commodity instead of a currency. “While I stick to what we said in the report of the virtual currencies committee, the crypto asset is anybody’s right to create. The value lies in the eyes of the holder,” he had said.

Garg suggested three different laws around three big use cases of crypto technology – digital currencies, crypto businesses and crypto assets. First, a digital rupee or digital currency law as “time has come for digital currencies to be evolved and issued as virtual currencies. This law can be used to put a ban on private cryptos except for limited use like stable coins, in-platform currency etc…We should remember now that whenever we deal with the issue of cryptos, it is not simply the bitcoin case any longer. There are various use cases of cryptocurrencies which need to be dealt with.”

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The second law, Garg suggested should be to regulate crypto businesses in the country such as crypto exchanges and others. “Digital businesses are getting created using blockchain and cryptography technology. You can run programmes or write them or manage any asset or create services, for example, Decentralised Finance (DeFi) in the financial services space. You have credit being extended on different platforms, you have insurance, asset management, etc., done using the crypto platforms. I call the crypto businesses distinguished from cryptocurrencies.” 

The third law according to Garg could be for regulating crypto assets. “I think it will make sense to bring a financial crypto assets kind of law, most probably by a separate regulator to regulate the entire digital assets of the crypto world…Crypto assets is the third big area that has acquired prominence. NFTs have become very common that can be used to virtually turn any commodity or digital service into an asset,” he added.

The crypto bill was deferred for introduction again during the winter session after the Budget session last year. Garg said the decentralised mode (of blockchain) is going to be quite competitive and perhaps more efficient than the centralised system that forms the basis for the current financial and government structure. “However, it doesn’t mean that centralised technology and system will be completely vanquished by the decentralised system.” 

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