Prime Minister Narendra Modi on Saturday chaired a meeting amid grave concern over the nascent cryptocurrency market that could lead to “money laundering and terror financing,” sources said.
At the meeting concerns were also raised over what was seen as “attempts to mislead the youth through over-promising and misleading non-transparent advertising.” The meeting took on board serious concern over the bombardment of advertising, both online and offline, to lure people into speculating in this market.
The sources said that unregulated crypto markets cannot be allowed to become avenues for money laundering and terror financing. Besides, some legal measures may be put in place to prevent misleading and non-transparent advertising.
After the meeting, sources said that the Centre is cognisant of the fact that cryptocurrency is an evolving technology. A decision has been taken that the government will keep a close watch and take proactive steps.
Sources said the meeting was an outcome of a consultative process, with the Reserve Bank of India, Finance Ministry and Home Ministry having sounded out “experts from across the country and the world”.
The worry comes in the backdrop of a sudden rise in crypto investments. “Crores of Indians have invested over Rs 600,000 crore in crypto assets,” claimed an advertisement by a group of 13 members, including Internet and Mobile Association of India, Blockchain & Crypto Assets Council’s, crypto exchanges and others that are part of crypto ecosystem in India.
The RBI has expressed its concern over crypto currency which can have a destabilising effect on the economy. The value of the currency also fluctuates wildly and can result in huge losses to those investing in it.
The RBI Governor has also stated that claims about the sudden surge in investments in cryptocurrency appear to be “exaggerated” as most people have put in only small amounts of Rs 1,000 to 2,000 in the digital currency.
Sources said RBI is keeping a close track of investments getting routed from the banking system to crypto exchanges and is sourcing periodic data from banks on a regular basis.
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The Parliamentary Standing Committee on Finance, meanwhile, has called cryptocurrency associations and industry experts on Monday for a meeting on “opportunities and challenges” in the sector.
Capital market regulator SEBI also has reservations on regulating them as a financial asset class, sources said.
SEBI has stated that it has no control over the “clearing and settlement” of cryptos, and that it cannot offer counter-party guarantee as is being done for stocks, sources said.
The issue of first defining the cryptocurrency, whether it is a currency, commodity, or security has also been pointed out.
“There was a consensus that steps taken by the Government will be progressive and forward-looking.”
Global examples of regulation and best practices were also looked at. In September, China declared all cryptocurrency transactions illegal, effectively imposing a complete ban.
The Government view is that a framework on cryptocurrencies will require “global partnerships and collective strategies”.
The government held off on plans to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the budget session as it continued discussions with stakeholders.
The draft law proposed to prohibit all private cryptocurrencies. The government is keeping its mind open on studying the pros and cons of whether it should allow “official digital currency.”
