Blocking innovation: Govt should regulate cryptocurrencies rather than ban their trade

By: |
September 18, 2020 5:45 AM

The govt should regulate cryptocurrencies rather than ban their trade, given blockchain innovation would suffer

While the government will still allow investment in blockchain, trade in cryptocurrencies will not be allowed if a Bill is passed to this regard.While the government will still allow investment in blockchain, trade in cryptocurrencies will not be allowed if a Bill is passed to this regard.

There are reports that the government is mulling over a law to ban trade in cryptocurrencies, though there is no such Bill listed to be taken up by Parliament in the current session. But, given the government’s record of flip-flops on the subject, it is not entirely inconceivable that the government would plan a like move this. In 2018, while an inter-ministerial group had agreed on having cryptocurrency exchanges, a year later, the government decided to ban mining, holding, selling, transferring or using cryptocurrency.

The Supreme Court, earlier this year, had quashed a 2018 RBI circular, reversing the ban on virtual currency exchanges, which led to restarting of trade in virtual currencies; indeed, as per a study, trading surged 450% within two months of the ban being overturned. But, the court had left the ball in the government’s court to decide the future course of action. While the government will still allow investment in blockchain, trade in cryptocurrencies will not be allowed if a Bill is passed to this regard. India can solidly be expected to lose out if a ban is imposed. While most countries have passed laws to regulate cryptocurrency trade, there have been no bans. Instead, they have ensured an ecosystem that nurtures the development of cryptocurrencies which, in turn, has helped fuel the growth of blockchain start-ups. China, according to Tracxn, has twice the number of blockchain start-ups that India has. Rather than banning such currencies, the government would do well to regulate exchanges by strengthening KYC norms and not allowing high speculative trading. With the government mulling using blockchain for voting—it is already used for land record digitisation in a few states—India needs more innovation in the field, not bans on forms of use.

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