The nation was gripped with the crypto fever—everyone was jumping on the crypto exchange bandwagon, the owners of the platforms were enticing the private equity firms, celebrities were endorsing crypto products. But the government was acting as a wet blanket, threatening to stop the celebrations by introducing harsher regulations and taming the festivities.So how should these times play out so that we tell the stories with pride and not regret?Should crypto assets be banned?Let’s begin with the primary question – should the crypto assets be banned completely? Crypto assets are unregulated and decentralised resources powered by a promising technology called the blockchain. Time and again, the government has endorsed blockchain technology and recognised its utility in terms of record-keeping, storage of information and as an impenetrable tracking system. However, crypto-assets such as Bitcoin, Ether, and the recently hyped Shiba Inu and Dogecoin, traded on crypto platforms, are something the government is clearly reluctant to support.The reluctance was first expressed in the RBI announcements cautioning the public on the trading of crypto assets. Thereafter, the bank regulator also issued a circular directing all the banks to withdraw banking support given to crypto platforms almost crippling the industry at the stroke of a pen.At that time the Supreme Court came to the rescue and overturned the circular on the lines that no harm was caused to the banks by providing banking support to virtual currency exchanges.During that period when the apex court was still deliberating the matter, a bill banning cryptocurrencies was made available in the public domain. Tough penalties were proposed to be levied on holders of crypto assets and businesses dealing with such assets.However, the bill was never introduced in Parliament. Although these are the developments of 2019 and early 2020, it seems a decade has passed as so much has happened in the crypto realm since then.Virtual currency platforms have more than doubled in two years, non-fungible tokens have stormed the markets and the millennials are hooked on to the easy money trades. Nevertheless, the popularity itself is no defence to banning crypto assets.The technology backing crypto assets is robust and impenetrable. Significant businesses, the world over, are making crypto payments for many projects and there are countries that have recognised cryptocurrency as a mode of exchange.As such, it may not be a viable idea to ban the virtual currencies altogether and later regret missing the bus should the other nations adopt it in the future not to mention provide encouragement to bootlegging. The need of the hour is effective regulations that would not only safeguard the average investor but also protect the interest of businesses that are run by tech-savvy entrepreneurs.More importantly from the government’s perspective, this could be an attractive source of revenue given the amounts transacted on a daily basis on the virtual currency platforms.Also Read | Crypto tokens should be designated as special class of securities, brought under SEBI: CIIFramework of regulationsThe regulations should first introduce a central regulatory authority to monitor and bring in rules from time to time to this dynamic and complex sector. Even the existing regulators like the RBI or SEBI could be entrusted with the additional responsibility of framing policies for the crypto asset market.Taxation laws should be amended to provide clarity on whether crypto-assets can be termed as capital assets or should be given a different treatment. In terms of GST, the rate should be determined, and clarity should be provided if they could be termed as ‘digital goods’.Rules are required to be framed in terms of cross border transactions of crypto assets and at the same time, the funding activities such as initial coin offerings and likes should be analysed to decide if they can be adopted within the Indian financial framework. Penalties must be introduced for deterring fraudulent activities.The world of crypto assets is unregulated, and the only way the government can monitor this sphere is by legitimising the businesses in and around it. A more specific legal structure for establishing the genuineness of customers along with checks and balances for the companies in the form of regular compliances will go a long way in curbing the fear of virtual currencies ending in the wrong hands for terrorism or anti-establishment activities.At this stage, it may not be feasible for the government to recognise virtual currencies as a mode of exchange but regulating them as tradeable commodities with adequate policies for effective monitoring could be a decisive move to safeguard the growing businesses and the interest of millions of investors. Policies around a greater penetration, viability of related crypto technology and the long-term impact on the financial sector will come as the next set of challenges.–Rashmi Deshpande is partner at Khaitan & Co. Views expressed are personal.