Govt panel suggests penalty for crypto holders, hails blockchain

Indian Government constituted inter-ministerial committee has recommended banning cryptocurrency and impose fines and penalty for being involved in activities related to them in the country.

Given the risks associated with them and volatility in their prices, the group has recommended banning of the cryptocurrencies in India and imposing fines and penalties for carrying on of any activities connected with cryptocurrencies in India," as per the report.

Private cryptocurrencies are of no real value, said Subhash Chandra Garg, Secretary, Department of Economic Affairs.

The report further said that several cryptocurrencies including Ethereum, Ripple, and Cardano have emerged, about 2,116 virtual currencies with a market capitalisation of $119.46 billion. It also suggested draft legislation.

However, the committee hailed the distributed ledger system (DLS) or Blockchain technology as a medium that allows transactions without the need for intermediaries and can have positive effects if deployed in financial services.

The committee is very receptive and supportive of distributed ledger technologies and recommends its widespread use in delivering financial services. It also opens up the door for a possible official digital rupee, added Garg in a Tweet.

The Committee to study issues related to virtual currencies was constituted on November 2, 2017, under the chairmanship of Subhash Chandra Garg,  and comprising of Ajay Prakash Sawhney (Secretary, Ministry of Electronics and Information Technology), Ajay Tyagi(Chairman, Securities and Exchange Board of India) and B.P.Kanungo (Deputy Governor, Reserve Bank of India).

Earlier last year, the Finance Minister Arun Jaitley had expressed similar concerns.

The Government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system, then Finance Minister Arun Jaitley had said while present 2018 budget.

However, he also hailed the distributed ledger system (DLS) or Blockchain technology as a medium that allows transactions without the need of intermediaries.

The Government will explore the use of blockchain technology proactively for using digital economy, the FM added.

However, it remains to be seen how the govt will use blockchain.

In April last year, RBI had ordered banks e-wallets, and payment gateway providers to withdraw support for cryptocurrency exchanges and other businesses dealing with it.

Meanwhile, industry experts believe that the case on cryptocurrency ban lacks transparency as the government did not adequately invite recommendations or hold consultations with stakeholders.

Several crypto communities expressed their anguish over the move on social media.

Ajeet Khuranna, CEO of crypto exchange Zebpay, which was compelled to shift out of India,

Instead of addressing the concerns around cryptocurrencies, we are just throwing out the baby with the bath water, thereby ensuring that the potential benefits of decentralised public-blockchain based tokens will evade India.

— Ajeet Khurana (@AjeetK) July 22, 2019

" target="_blank" rel="noopener noreferrer">said that India is closing doors to innovation.

Instead of addressing the concerns around cryptocurrencies, we are just throwing out the baby with the bath water, thereby ensuring that the potential benefits of decentralised public-blockchain based tokens will evade India.

— Ajeet Khurana (@AjeetK) July 22, 2019

Many others including cybersecurity expert said that the decision by the Indian government is not progressive.