India won't ban cryptocurrencies outright, according to government sources. Officials are exploring whether to treat digital assets as commodities. An anonymous senior government official told Quartz
India won't ban cryptocurrencies outright, according to government sources. Officials are exploring whether to treat digital assets as commodities.
An anonymous senior government official told Quartz that the panel reviewing digital currencies isn't moving toward prohibition. "The issue here is about regulating the trade and we need to know where the money is coming from," the official said. "Allowing it as (a) commodity may let us better regulate trade and so that is being looked at."
India's approach has remained uncertain for months. The government formed its first committee in April 2017 under Prime Minister Narendra Modi to study the sector. Subhash Chandra Garg, the economic affairs secretary, led the panel. In August, it submitted its report to Finance Minister Arun Jaitley, with early reports suggesting crypto wouldn't be declared illegal.
The government hadn't determined which agency would oversee regulations. In March, Shaktikanta Das, a former economic affairs secretary, noted the challenge: regulating cryptocurrencies would be difficult.
The government established a second committee. Garg stated that officials were taking steps to ensure digital currencies couldn't function as a payment mechanism. He was also working to appoint a regulator for uncontrolled crypto exchanges operating in India.
Jaitley articulated the government's position in his February budget speech. "The government does not recognise cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payments system," he said.
Reports had indicated that cryptocurrencies such as Bitcoin wouldn't become legal tender in India without regulation.
Last month, Garg told ET Now that draft regulations would be discussed in the first week of July and finished within the first fortnight.
If India treats crypto as a commodity rather than currency, it highlights a key distinction. R Gandhi, former deputy governor of the Reserve Bank of India, explained it this way: "If these are used to settle transactions, then it acquires the nature of currency. So that is one thing that one needs to be wary of. But if people want to invest in a commodity then that is different, because then we can assume that they are aware of the risks involved."
