Regulating cryptos has been the buzzword this week as the Centre readies a draft cryptocurrency law. The Parliamentary Standing Committee on Finance held a crucial meeting on November 15 to get views from several stakeholders. Sources said that there was a general consensus that cryptocurrencies should not be banned, but regulated.
All this comes just days after Prime Minister Narendra Modi chaired
a meeting on cryptos. CNBC-TV18 caught up with Jayant Sinha, chairman of the Standing Committee on Finance, after the meeting.
He said, “Today's taxation framework is very capable of handling crypto tokens and crypto finance. We have to decide of the many functions that crypto finance can fulfil. Where do we bucket different aspects of crypto finance? But it's very important to understand the different use cases, the different ways in which market participants want to use this, and then be able to draw the lines around it in a very clean, well-established way. and many jurisdictions are already putting in place these kinds of frameworks
To know what could this mean for crypto in India, CNBC-TV18 caught up with experts Rajesh Dhuddu, VP-Blockchain & Cybersecurity, Tech Mahindra; Rameesh Kailasam, President & CEO, Indiatech.org and Sidharth Sogani, Founder, CREBACO.
According to Dhuddu, this is a welcome small step to regularising the cryptocurrency market in India, and it's definitely a giant leap for the entire industry, as well as for innovation which will be fuelled by cryptocurrencies and the blockchain application.
From a regulatory aspect, there are several areas that one needs to look into. One, which was alluded to in the meeting yesterday, was on how to moderate and modulate the promise of cryptocurrencies that is being expressed in various advertisements, either by the cryptocurrency exchanges or by the cryptocurrency companies. The second is from the perspective of investor protection in terms of the deposits that are held in the cryptocurrency exchange by the investors.
The third would be from the perspective of regulations, especially KYC regulations that would be applicable if people end up leveraging these centralised exchanges for their crypto holdings. The fourth would be about incentives for this particular sector, because it is going to bring in a lot of foreign direct investment, as the regulatory climate is becoming increasingly clear and all the cobwebs are going to be removed, said Dhuddu. "So, there will be various aspects from these dimensions and of course, from a taxation perspective," he said.
"The good thing is, we don't have to reinvent the wheel -from an advertisement perspective, there is already an Advertising Standards Council of India, which can one look at the good practices that are applicable over there, and how can it be extended to advertisements related to cryptocurrencies," he added.
Dhuddu said there are a lot of depository guidelines, especially when people are holding deposits with banks. So, this could be classified as a digital asset, and what aspects of the deposit insurance guidelines can be repurposed and can be applied here. From a lending perspective, it is going to fuel a lot of fintech innovation, purely from the perspective of peer-to-peer lending. The RBI has come up with very good regulatory frameworks from a peer-to-peer lending perspective, and what aspects and what provisions of that lending framework can be repurposed to look at it.
"So on the face of it, it definitely seems a Herculean task in terms of bringing in regulations from all aspects. But if we intelligently look at various provisions that are available, along the lines that I had mentioned, and if they can be repurposed, we'll be able to get to a very good environment," explained Dhuddu.
According to Sogani, there has been aggressive advertisement in the last three to four months, primarily because all the exchanges, and everybody in the industry want to leverage the bull run. "Right now, we all know that crypto is on an upward moment and that is the best time to acquire as many customers as possible," he said.
However, there is a lot of volatility, there are meme coins, and initially, investors make a quick buck, and they get into all these speculative assets, hence there has to be a disclaimer. So aggressive the advertising has been in the IPL and in the World Cup that investors just think that it is something they must try. But for a retail investor, there has to be more disclaimers, and a little more educational advertisement that there is risk involved, there is a lot of volatility, and if not dealt with in the right way, the investor could lose money.
For the full discussion, watch the accompanying video