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Cryptocurrency conundrum: Is banning private players when Bitcoin is booming the way to go?

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CNBC-TV18 caught up with SC Garg, Former Finance Secretary, Vikram Subburaj, Co-Founder & CEO of Giottus, Vaibhav Gaggar, Managing Partner at Gaggar & Partners and Sumit Gupta, CEO & Co-Founder of CoinDCX to understand the situation better.

Bitcoin is creating new records as valley maverick Elon Musk and traditional mega financial institutions like Mastercard and Bank of New York have joined the list of adopters.
According to Morgan Stanley's Chief Global Strategist, Ruchir Sharma, Bitcoin was not only the hottest investment of 2020, but it was also the hottest investment of the decade ending in 2020, up more than 200 percent a year on average.
Even as the crypto market grows, central banks globally are looking at the possibility of introducing a digital currency. According to a BIS survey of global central banks, all central banks have begun studying the prospects and viability, with many central banks in both advanced economies and emerging markets attempting to replicate wholesale payment systems using distributed ledger technology.
Cryptocurrency bill
In India, the government is gearing up to table a bill to ban private cryptocurrencies while creating a framework for a Reserve Bank of India (RBI) backed Indian digital currency in the parliament during the ongoing budget session.
People in the know say that the bill will specify the modalities for transactions and payments using the Indian digital currency, through specified financial institutions and banks. It is also likely to allow individuals to use this currency and hold accounts. The bill is also expected to have the framework for the derivation of the value of this currency by the RBI.
On the other hand, the proposed law may put a blanket ban on private cryptocurrencies. However, CNBC-TV18 has also learnt that those who currently hold these cryptocurrencies will be given some time to exit. The bill will also spell out penalties for those who do not adhere to the new rules.
CNBC-TV18 caught up with SC Garg, Former Finance Secretary, Vikram Subburaj, Co-Founder & CEO of Giottus, Vaibhav Gaggar, Managing Partner at Gaggar & Partners and Sumit Gupta, CEO & Co-Founder of CoinDCX to understand the situation better.
Garg, who headed the panel which has proposed that a law be enacted to ban all private cryptocurrencies in India, said, “The problem is that the cryptocurrencies, starting with bitcoin, initially evolved or came up as currencies. They were meant to facilitate international payments, they were meant to take care of the transfers of money from one place to another. At the point in time, the asset part of it was very low and that is why it is called a coin, it is called currency. But over the years, its role as a currency has diminished has become smaller, and this has become more of an investment into an asset kind of thing. So, if this community ends this confusion and evolves this purely as an asset and not as currency to be part of the payment or transfer system – the bill only targets cryptocurrencies as currencies, it does not deal with cryptocurrencies as assets.”
Vaibhav Gaggar, however, countered this. He said, “What one has been reading about since we have not seen the bill yet, there seems to be a total prohibition coming and I don’t see a distinction between it being a currency versus an asset. From what one has seen or has been hearing, it appears they are going to say that even an investment into it is not going to be permitted, you cannot use let alone from India and Indian currency, but even if you have funds lying overseas, you are not going to be permitted to trade in the currencies. So, I am not too sure whether the government is going to follow through with the nuanced distinction that SC Garg pointed out.”
Vikram Subburaj said that the government cannot have a law to wipe out these investments.
“Even if the government is looking at banning, we hope that they give some timeline so that the consumer investment is safeguarded. We are talking about consumer protection and we cannot wipe away that investment; one fine day we wake up and it is all gone. So keeping the consumer in the center of all this, if the decision is taken, that would be something that could be welcome. If the government is going to say that let us not use it as a payment method, not as currency, if it is asset class and the trading continues, then the investments are safeguarded. So, that is a good move forward. Any small hint even if the government provides that trading is going to continue and there is going to be restriction on one or two places, that will give a big relief to consumers and also the startups and ecosystems which are dependent on cryptocurrencies,” he reasoned.
Sumit Gupta elaborated this further saying that there are around 75 lakh investors who are in this confusion.
“The investor base is highly concerned and we are talking about 75 lakh Indians who are invested into cryptocurrencies and they are clueless. There is a lot of confusion in calling bitcoin as cryptocurrency and not calling it an asset. The bill that was framed earlier was made considering bitcoin as a currency, but what the industry feels is that it should be regulated as an asset, as a commodity where people should be allowed to invest at least, otherwise India will be left behind. So, definitely ban is not the right direction. India will lose out on lots of opportunities while the rest of the world will be adopting and progressing in the world of digital assets,” he weighed in.

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