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Wednesday, December 08, 2021

Crypto map: PM’s meet calls for ‘progressive’ steps, caution over hype

At the meeting, sources said, concerns were raised over what was seen as “attempts to mislead the youth through over-promising” and “non-transparent advertising.”

Written by Sunny Verma | New Delhi |
Updated: November 14, 2021 8:27:50 am
Narendra Modi, Modi Shimla, Om Birla, Presiding officers' conference, Public servants, indian lawmakers, India news, Indian expressUttar Pradesh is poised to become the only state in India to have five international airports as Prime Minister Modi will lay the foundation stone of the Noida International Airport in Jewar, Gautam Buddha Nagar, on November 25 at 1 PM, the PMO said. (PTI/File)

Prime Minister Narendra Modi Saturday chaired a meeting on the way forward for managing the cryptocurrency sector where a consensus emerged on the government needing to take “progressive and forward-looking” steps while ensuring that an unregulated crypto market does not lead to “money laundering and terror financing”, sources said.

At the meeting, sources said, concerns were raised over what was seen as “attempts to mislead the youth through over-promising” and “non-transparent advertising.”

Sources said the meeting was an outcome of a consultative process, with the Reserve Bank of India, Finance Ministry and Home Ministry having sounded out “experts from across the country and the world”.

Multiple sources told The Sunday Express that attempts are being made to design a regulatory framework to deal with cryptocurrencies, even as key financial sector regulators have flagged their “serious concerns.”

“The PM’s meeting discussed that unregulated crypto markets cannot be allowed to become avenues for money laundering and terror financing. The Government is aware that this is an evolving technology,” a source said.

“There was a consensus that steps taken by the Government will be progressive and forward-looking.”

Global examples of regulation and best practices were also looked at. In September, China declared all cryptocurrency transactions illegal, effectively imposing a complete ban. The same month, El Salvador permitted Bitcoin as legal tender. In most parts of the world, this market remains unregulated.

The US Securities and Exchange Commission Friday is reported to have rejected rule changes that would have allowed the listing and trading of the VanEck Bitcoin exchange-traded fund.

The Government view is that a framework on cryptocurrencies will require “global partnerships and collective strategies”.

During the meeting, there was an unease with the bombardment of advertising, both online and offline, to lure people into speculating in this market, a source said.

The recent concerns come on the back of a huge surge in crypto investments. “Crores of Indians have invested over Rs 600,000 crore in crypto assets,” claimed an advertisement by a group of 13 members, including Internet and Mobile Association of India, Blockchain & Crypto Assets Council’s (BACC), crypto exchanges and others that are part of crypto ecosystem in India.

The group claimed they are committed to complying with BACC’s self-regulatory code of conduct. This after alarms have been raised at various levels — within the government, regulatory circles and leaders in the investment fraternity — over the extent of investment exposure of Indian retail investors in this unregulated asset class.

Sources said RBI is keeping a close track of investments getting routed from the banking system to crypto exchanges and is sourcing periodic data from banks on a regular basis.

The Parliamentary Standing Committee on Finance, meanwhile, has called cryptocurrency associations and industry experts on Monday for a meeting on “opportunities and challenges” in the sector.

“On crypto…we have serious concerns from the point of view of macroeconomic and financial stability. How the issue has to be dealt with — we have given our detailed suggestions to the government; as far as I know the matter is under the active consideration of the government and the government will decide,” RBI Governor Shaktikanta Das said earlier this week at a Business Standard event.
While the RBI has repeatedly voiced concerns about cryptocurrencies being accepted as legal tender or at par with cash, capital market regulator SEBI has reservations on regulating them as a financial asset, sources said.

The latter has flagged that it has no control over the “clearing and settlement” of cryptos, and that it cannot offer counter-party guarantee as is being done for stocks, sources said.

The issue of first defining the cryptocurrency, whether it is a currency, commodity, or security has also been pointed out.

The government held off on plans to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the budget session as it continued discussions with stakeholders. The draft law proposed to prohibit all private cryptocurrencies and laid down the regulatory framework for the launch of an “official digital currency”.

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