Cryptocurrency law

THE proposed legislation to ban private cryptocurrencies in the country, as expected, has led to panic selling by individual holders, but the draft Bill needs to be welcomed, with the hope that it delivers on the promise of ensuring strict regulation and bringing clarity to the investors. More so in the light of the craze and frenzy, especially among young Indians, to not miss out on what is being portrayed as an opportunity to make money overnight on digital investments. There has been criticism over the delayed government response to come up with a regulatory framework, but the Centre’s strategy to not rush in and instead factor in the views of a broad spectrum of domain experts could well be the right strategy, considering how the issue at hand has spooked governments the world over.

The coming days could see animated debates and discussions on the definition of ‘private cryptocurrencies’, what will not be allowed, the exceptions, the technological loopholes in the new regulations. At the core of the entire exercise would be the serious concerns that cryptocurrencies pose. Not only to macroeconomic and financial stability, as the RBI Governor has been stressing, or becoming conduits for illegal activity, but also the pitfalls of being lured into an investment trap that has few or no openings. A gamble, in other words, that can go horribly wrong, with no recourse.

A complete ban looks unlikely considering the impracticality. An e-activity that has huge global appeal needs better handling than outright rejection, which will only encourage clandestine indulgence. As the framework for creation of a central bank digital currency takes shape, there is a clamour for recognising cryptos as an asset class with tight regulation. Where the capital gains of investors are taxed, there is a code of conduct, transparency and misleading advertising has no place. It is still uncharted territory, but marks a decisive step forward by the government.