Can’t ban cryptocurrency but should regulate, say members of Parliamentary Panel

Heads of crypto currency exchanges, members of Blockchain and Crypto Assets Council and representatives of industry bodies attended the meeting.

A parliamentary panel, chaired by BJP leader Jayant Sinha, on Monday discussed the pros and cons of crypto finance with various stakeholders, and several members were in favour of regulating crypto currency exchanges rather than imposing an outright ban on new-age currencies, according to sources. 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 when there is a growing interest in such assets worldwide. Currently, there are neither specific regulations nor an outright ban on the use of crypto currencies in the country.

Heads of crypto currency exchanges and members of Blockchain and Crypto Assets Council attended the meeting. Representatives of industry bodies, including CII, and other stakeholders were also present. They made their submissions on crypto finance to the panel.

During the meeting, members of the Parliamentary Standing Committee on Finance cautioned the representatives present that crypto currencies, which are attracting more investors, should not go the way of ponzi schemes, the sources said. Ponzi schemes lure people into investing in fraudulent money pooling activities by promising high returns.

Showing a full page advertisement of a crypto exchange in a national daily, a panel member from an opposition party said that crypto currency players should not give misleading advertisements to lure easy money from youngsters.

The sources said that there was a broad understanding at the meeting that crypto currencies cannot be left unchecked and some kind of regulation was required. However, several members were not keen on imposing an outright ban on such currencies, they added.

From the industry side, Naveen Surya, Chairman of Fintech Convergence Council, Ashish Singhal, CEO of Coinswitch Kuber and Sumit Gupta, CEO of CoinDCX, were among those who participated in the meeting. Industry representatives were in favour of regulations but there was no clarity on whether RBI, Sebi, or any other new institution should regulate the crypto currency industry, the sources said.

Several MPs in the meeting pointed that crypto currency is gaining attraction like Ponzi schemes did in their earlier days and suggested that it should not go the same way, sources said. 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’ fungibility in the real world and its interface with the real world should be regulated, they added.

Currency is a domain of the sovereign whereby its value is fixed in assured manner and crypto currency is a computer programme managed in distributed format on internet. Its value is only discovered by a buyer and user on an exchange which itself is illegal, they noted.

One of the members even wondered how crypto currencies are going to be regulated when even regulating the internet remains difficult. Members also expressed concerns about the possibility of crypto currencies being used for financing terror activities.

In the morning, panel Chairman Sinha said the meeting on crypto finance will discuss the opportunities and challenges this fast evolving industry presents to the regulators and policy makers. “We have called stakeholders from across the industry, including operators of major exchanges, members of CII as well as academics from the Indian Institute of Management (IIM) Ahmedabad, who have done a very thorough study on the crypto finance,” Sinha told PTI.

Further, he said the panel has called representatives from the India Internet and Mobile Association of India, which comprise various tech-related industry bodies including BACC, a specific body that deals with crypto finance players.

After the meeting, Sinha said,”We heard from them about their views on the right regulatory framework for this industry as it continues to develop and evolve. The idea was to listen to their perspective,” he said.

This was the first meeting on the subject that was convened by the Parliamentary Standing Committee on Finance. The panel is chaired by Sinha, who is also a former Minister of State for Finance.

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. 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.