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Before bringing in legislation, we should figure out what crypto is: Ex-finance secretary SC Garg

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Before bringing in legislation, we should figure out what crypto is: Ex-finance secretary SC Garg


The Parliamentary standing committee on finance holds its first meeting on cryptocurrencies as the government gears up to bring a legislation in the upcoming winter session. This comes days after Prime Minister Modi chaired a meeting on cryptos and government sources promised "progressive" and "forward looking" steps. To discuss this forward, CNBC-TV18’s Parikshit Luthra spoke to Gopal Krishna Agarwal, Spokesperson, BJP, Tanvi Ratna, CEO, Policy 4.0 and SC Garg, Former Finance Secretary

The parliamentary standing committee on finance is hosting a crucial meeting today to get views from several stakeholders as the Centre readies a draft Crypto Currency Law.

The industry, we learn, has recommended progressive regulations, which they feel will ensure wealth creation and higher tax revenues for the exchequer.
They want the government to treat cryptocurrencies as a special class, which should be subject to income tax and GST.
The government, on the other hand, is wary of cryptocurrencies becoming an avenue for 'money laundering and terror financing'. Prime Minister Narendra Modi had chaired a comprehensive meeting on the way forward for cryptocurrencies in India over the weekend.
Meanwhile, just last week, RBI governor Shaktikanta Das reiterated his concerns over cryptos. He was speaking at a summit hosted by Business Standard and also played down reports on the penetration of cryptocurrencies in India.
To take this discussion forward, CNBC-TV18’s Parikshit Luthra spoke to Gopal Krishna Agarwal, Spokesperson, BJP, Tanvi Ratna, CEO, Policy 4.0, and SC Garg, Former Finance Secretary.
On changes in law for regulating the cryptocurrency sector, Garg said, “Whenever you talk about regulating something, we need to figure out what are we regulating. The cryptos is something which we have not really figured out what it is. Is it a currency, is it a commodity, is it a service, platforms, asset, what is it? And therefore, whenever we say that we should bring about a regulation, I think, we should figure that (what is it?) out first.”
He added, “Whenever we regulate it for fair trading, risk-free or visible risk, consumer protection, investment protection and all, so I do suggest – I think we should move on. Keep the currency as separate, which can be banned, which no private company or crypto issuers can be allowed to do. But for the rest, I think we should bring a law which is on the line, maybe better to suit the specific characteristic of this, like we brought in earlier the Securities Contract Regulation Act. So, for crypto contracts or crypto assets regulation, we can bring in some law where the appropriate regulations can be enacted. I think, that is the way forward, but it will be very necessary to keep the various facets of it separate.”
On regulating crypto exchanges, Garg said, “The crypto exchanges today do the trading of crypto assets. So, if you are able to figure out because I think, I must tell you, there is an enormous amount of complication in the crypto as an asset. This is one asset class which has the commodity, service, capital, price, everything sort of rolled into one product and one price. So, for crypto exchanges which do it, whenever we are in a position to bring a law for regulating cryptos, that would also sort of regulate the exchanges which will do the trading in crypto; so it goes with it. You can't bring a separate law for only the crypto exchanges and not for the crypto as the asset or the product.”
On regulations on cryptocurrencies, Agarwal said, “In the past,RBI did come out with a circular where it wanted the banks to completely ban people holding cryptocurrencies. But then it was asked to be withdrawn by the Supreme Court and RBI later on withdrew it. The finance minister also said that, at present we are not looking into banning the cryptocurrency, there are concerns, everybody has concerns, and we are well aware that RBI has serious concerns, and the current status of regulation or the way people are investing, unregulated exchanges have come up, there is ample evidence that money laundering can take place. So, these concerns are there and the government is well aware. But ultimately these concerns etc. will be checked and controlled by regulating it."
He added, “We cannot just ban it because it is right to stay in the country. If you ban something the illegal market develops; that is also very well known to the government. Also, there is immense potential in this whole technology, blockchain technology. India is going to be a leader into this digital financial markets and fintech, etc. So, we cannot be out of the whole system of cryptocurrencies. Therefore, our Prime Minister has taken a meeting and I feel regulation is the way ahead.”
Ratna said, “Overall, the primary concern and the reason why this whole issue has been, sort of, stuck in India, are the monetary risks around crypto. It is very easy to say that India should regulate. But the simple fact is that there is no precedent for India in terms of regulating monetary risk, because that is not really a risk that most advanced countries have. The US, Europe, these are countries with fully convertible currencies. They do not have a challenge in terms of having free flow of capital, having it converted anywhere, in any quantity. This is a challenge for India, because India, as you know, has capital controls, it has an LRS limit. For India, having exchange rate risk, or any kind of money supply risk, that is a big challenge. Unless there is a solution to tackle that, it is all fair to say that there will be revenue from tax and things like that. But it does not address the real concern, which is quite a big concern for a state and for a sovereign currency.”
For full interview, watch accompanying video...
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