Finance Minister Nirmala Sitharaman on Monday made it clear on the floor of Parliament during the ongoing Winter Session that the government has no plans to recognise Bitcoin as a currency.
Truth be told, governments all over the world are clueless about how to regulate cryptocurrency, including Bitcoin, which is viewed by many as a ‘speculative investment’.
In 2008, the collapse of Lehman Brothers hit the American economy hard and the ripple effects were felt by economies across the world. This is when virtual currencies and cryptocurrency came into the picture. In the last 10 years, Bitcoin, according to some estimates, has offered 1 lakh-time return but hardly anyone has any ‘know-how’ regarding these currencies. Lockdowns, which eroded the fundamentals of the economy, further pushed many to invest in cryptocurrency—I would say rather recklessly.
Although cryptocurrency looks like a lucrative investment option at first, there is no running away from the fact that cryptocurrencies are still illegal in India and in most big economies. As a result, the darknet is where the crypto market is booming.
Outside the purview of regulation, cryptocurrency can become a safe mode of transaction for scamsters and terrorists. For instance, in a recent case, a hacker siphoned off crores of rupees in a ‘Bitcoin’ scam in Karnataka, with alleged involvement of some high-profile names as well. The hacker has been accused of cyber crimes and drug peddling.
Cryptocurrency as an Asset?
Not just in India, cryptocurrency has evoked strong reactions, for and against, in other countries as well. In the United States, while Elon Musk is rooting for cryptocurrency, investor Warren Buffett has vowed not to invest even a single penny in crypto. Former Secretary of State Hillary Clinton has called for regulating the crypto market; it could pose a threat to conventional economies, she says.
Experts all over the world have expressed their reservations over classifying cryptocurrency as any form of asset.
Coming back to India, the crypto craze has reached tier-II cities and its non-regulation can raise questions on the sovereign authority of the Government of India. In his annual Vijayadashami speech, RSS chief Mohan Bhagwat expressed his reservations over cryptocurrency and OTT platforms. While Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 were issued early this year to provide a framework for regulating content on over-the-top (OTT) platforms, crypto continues to operate under a cloud of uncertainty and suspicion.
The Reserve Bank of India had way back in 2013 expressed its reservations regarding cryptocurrency. Eight years later, we still do not have any law or regulation for the big crypto market. Without Parliament-specific approval and amendment in the RBI Act, private currency like crypto cannot be treated as valid legal tender.
Non-regulation of cryptocurrency has put crores of individual investors in India in jeopardy—this is no less a risk to national security. Further, non-levy of GST in various layers of crypto transactions and non-imposition of Income Tax with penalty has caused huge loss to the exchequer.
Tough Times, Tough Measures
It is a misconception that new laws and regulatory environment will harm the blockchain technology sector. Blockchain technology, per se, can be used to improve governance and administration.
To secure the sector’s future, jurisprudence is essential. Else, it may be susceptible to uncertain government interventions such as those employed by the Chinese government, which have led to loss of trust, investments, and overall destruction of the market.
As per the agenda of the Winter Session of Parliament, a Bill is set to be tabled proposing a ban on private cryptocurrencies. Besides a new law, suitable amendments may be needed in Information Technology Act, Income Tax Act, Companies Act, SEBI Act and RBI Act. These will ensure due enforcement of the ban and least judicial intervention in crypto matters. Tough times call for tough measures. Although government has no business to be in business, not regulating cryptocurrency could be catastrophic.
Virag Gupta is a columnist and advocate. He can be followed @viraggupta. The views expressed in this article are those of the author and do not represent the stand of this publication.
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