Walk with caution | Indian express
Among the 26 bills listed for consideration in the winter session of Parliament starting on Monday is the Cryptocurrency and Official Digital Currency Regulation Bill, 2021. The bill throws in the bases of a framework for the introduction of the digital currency which is to be issued by the Reserve Bank of India (RBI). But, at the same time, it also seeks to “ban all private cryptocurrencies in India”, allowing “certain exceptions to promote the underlying technology of the cryptocurrency and its uses”. While granular details are expected, this would be a mistake. Certainly, there are legitimate concerns about cryptocurrencies. But an outright ban, even if there are questions about its applicability, would not be the prudent path to take. In its haste to clarify the matter, the government should not make the mistake of rushing this bill through without a detailed discussion of the implications of its action. If the government is to learn any lesson from the agricultural law saga, it is that it is better to avoid passing contentious laws in Parliament without proper debate and discussion.
Across the world, the response to cryptocurrencies has varied. In September, China imposed a complete ban on crypto transactions. Countries like Japan and the UK have created space for their operation. The regulatory architecture, the rules of governance, the scope of taxation depend on how the country views cryptocurrency – as a currency, an asset or a commodity. While concerns about money laundering and terrorist financing have been raised repeatedly, from a monetary and fiscal policy perspective as well, there are valid concerns. Central banks fear the erosion of their monetary sovereignty, in particular through stable coins backed by reserve assets. If their acceptance as a medium of exchange gains ground, the effectiveness of their policies in responding to economic cycles will be called into question. Then there is also the loss of seigniorage income that must be faced. Additionally, an outright ban may simply push these activities beyond the scope of the app, complicating matters.
The question is controversial to say the least. There are strong differences of opinion even among policy makers. For example, RBI Governor Shaktikanta Das has repeatedly warned against cryptocurrencies, arguing that “there are serious concerns about macroeconomic and financial stability.” But a previous meeting chaired by the Prime Minister had spoken in favor of “progressive and forward-looking” measures in the field of cryptocurrency. Likewise, members of the Standing Committee on Finance, chaired by BJP member Jayant Sinha, are said to be more in favor of regulation, not a ban on cryptocurrencies. Considering that not everyone is on the same wavelength, the government must exercise caution. The way forward should be dictated by discussions and consultations with all stakeholders.