Crypto Menace

RBI Governor, Shaktikanta Das, has rightly flagged ‘far deeper issues’ involved in virtual currencies that could threaten India’s economic and financial stability. He has emphasized the need for wellinformed discussions before any decision on crypto currencies is taken at the highest level. This is the second time in a week that the RBI Governor has highlighted the perils of new-age currencies, while raising doubts about the number of investors trading on them and their claimed market value. Former Finance Secretary Subhash Chandra Garg has drawn attention to the crypto challenges faced by the government: hawala dealings; investments worth billions of dollars routed abroad; and evasion of capital gains tax. The Parliamentary Standing Committee on Finance has also held a meeting with industry associations and experts on the matter ‘Crypto Finance: Opportunities and Challenges’ and summed up that crypto currency cannot be stopped but must be regulated. The most serious concern raised by MPs was the security of investors’ money highlighting the full-page crypto currency advertisements in national dailies. The govt is planning to regulate crypto currency and get it under the Centre’s tax structure. PM Modi has also haired a meeting for crypto currency and related financial issues with the experts, discussing crypto currency’s usage of avenues for money laundering and terror financing. Currently, India has two crypto unicorns namely Coin Switch Kuber and Coin DCX. The Centre has been planning to introduce the Crypto currency and Regulation of Official Digital Currency Bill, 2021 in Parliament for the past two sessions. The Bill aims to prohibit all private crypto currencies and lay down the regulatory framework for the launch of an “official digital currency”. These remarks come days after the Parliamentary Standing Committee on Finance held a meeting with various stakeholders to discuss the pros and cons of crypto finance. With the government likely to introduce a Bill on crypto currencies during the upcoming winter session of Parliament, it remains to be seen whether a regulatory mechanism will be worked out instead of imposing a blanket ban.

Lack of transparency in the evolving crypto industry makes foolproof regulation or prohibition an onerous task. Volatility of crypto currencies is another vital aspect because you never know when the bubble will burst. Bitcoin, which had touched a new high of $69,000 last week, dropped to $58,600 on Tuesday. While taking a call on legitimising crypto currencies, the Indian government must factor in the prospect of a crypto crash that may hit millions of investors. For a start, the Centre should crack the whip on advertisements making misleading claims of enormous returns on crypto currency investments.