New Delhi: The Central government was initially in favour of “regulating” cryptocurrencies instead of imposing a blanket ban on them before it had a change of heart due to objections from various regulators, the record of discussions of the high-level committee, which released its recommendations on Tuesday, showed.
During deliberations, economic affairs secretary Subhash Chandra Garg, who was chairing the inter-ministerial committee, pressed for “accepting virtual currencies as an economic phenomenon” and was not in favour of a ban initially, arguing that “regulating it will likely lead to better results”.
In fact, in the first meeting of the committee, which was held on November 27, 2017, the committee had broadly agreed that “the banning option is difficult to implement”. “It may also drive some operators underground, which may encourage use of such ‘currencies’ for illegitimate purposes,” minutes of the meeting showed.
The committee initially wanted to focus on determining the nature of cryptocurrencies and whether it needed to be classified as commodities or financial assets.
However, in the second meeting of the committee held on February 22, 2018, the regulators pressed for imposing a complete ban on cryptocurrencies, such as bitcoins. This meeting took place after finance minister Arun Jaitley presented the Union Budget for 2018-19 in which he emphasised that the government does not consider virtual currencies as legal tender “and will take all measures to eliminate use of these crypto-assets.”
RBI deputy governor B.P. Kanungo and then Central Board of Direct Taxes (CBDT) chairman Sushil Chandra voiced their opinions favouring a ban on cryptocurrencies. Chandra said it creates “a chain of black money.” “He also mentioned that recent search i.e. conducted in exchanges dealing with virtual currencies had revealed that most uninformed people in interior places are being lured to buy it.”
However, Garg was still not convinced. He said the matter related to cryptocurrencies was supposed to be taken up in the G-20 meeting, which was supposed to be held soon during that time. He cited the example of South Korea which had to roll back their decision to ban cryptocurrencies.
“Secretary (EA) said that the option of banning can be looked afresh and asked RBI and CBDT to prepare draft law which might be needed to be prepared in case banning option is accepted,” the document said. He suggested that using cryptocurrencies in payment systems may be banned but not in its entirety “considering the nature of technology.”
Garg was supported by Ministry of Electronics and Information Technology secretary Ajay Prakash Sawhney in his view who felt that India, “being in the forefront of technological innovation”, should have an open attitude towards cryptocurrencies.
The meeting ended with conclusions to form two sets of papers – one on banning and the other on regulating cryptocurrencies.
However, in the concluding meeting of the committee held in a gap of almost a year – on January 9, 2019 – the committee agreed upon a draft law imposing a complete ban on cryptocurrencies which “took into account the global developments and interaction” with stakeholders such as the International Monetary Fund, among others.
By arrangement with Business Standard.