Former Indian Finance Minister: Cryptocurrencies Would be Difficult to Regulate

By James Gray·12 March 2018·2 min read

Key Points

India's hesitation toward digital currencies remains a defining feature of its regulatory landscape.
As policymakers grapple with whether outright prohibition makes sense, Shaktikanta Das—who previous

India's hesitation toward digital currencies remains a defining feature of its regulatory landscape. As policymakers grapple with whether outright prohibition makes sense, Shaktikanta Das—who previously held the position of secretary of economic affairs—has emerged as a vocal skeptic, contending that allowing cryptocurrencies would be misguided policy. Das has warned that effective oversight of the sector presents insurmountable obstacles. In his assessment, "Accepting reality, managing this sector through regulation would prove unworkable. Transactions would occur in private residences. Authorities cannot monitor what unfolds within every household. Given these fundamental constraints, I believe the asset class should be prohibited entirely." India's central bank, the Reserve Bank of India, signaled its concerns nearly five years prior in 2013, alerting participants to the hazards inherent in crypto trading, from cybersecurity threats to fraud. Such cautionary messages resurfaced as recently as last month.

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Despite official skepticism, investor enthusiasm has remained undeterred. To chart a course forward, the finance ministry established two separate investigative bodies. The initial panel, launched in spring 2017 and chaired by Das, delivered its findings to Finance Minister Arun Jaitley that August. At that juncture, analysts speculated that a full ban appeared improbable. The question of regulatory authority, however, remained unresolved. A second investigative group, led by Subhash Garg, now works toward making cryptocurrencies incompatible with domestic payment infrastructure. Simultaneously, the panel contemplates creating a regulatory body to supervise the currently unmonitored exchanges operating within India. The committee anticipates submitting conclusions before the fiscal year's end on March 31.

Jaitley, during his budget presentation in early February, positioned the government firmly against crypto adoption, stating it "will neither recognize digital assets as legitimate money nor tolerate their utilization in illicit financing schemes or transaction networks." Das emphasizes that cryptocurrencies lack underlying collateral. He notes that "Traditional currencies derive their legitimacy from RBI backing, representing sovereign authority. Corporate equity derives value from tangible company assets. Digital currencies, by contrast, possess no such foundation—they emerge from nothing, fabricated without substance."

India is not alone in its restrictive posture. China moved decisively last September, shuttering its domestic digital asset trading platforms. Speculation circulated that Chinese mining operations might relocate to jurisdictions including Russia, Thailand, or America. Beijing has since escalated its position, aiming to block its residents from accessing foreign-based cryptocurrency platforms.

India confronts a fundamental strategic choice: pursue the restrictive model exemplified by China, or adopt a more permissive stance? Another pressing concern looms—might suppressing legitimate markets simply force activity into unregulated shadows, ultimately complicating enforcement efforts?

MiningPool content is intended for information and educational purposes only and does not constitute financial, investment, or legal advice.

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