Panel not in favour of legalising virtual currencies

The Finance Ministry will work out a roadmap to regulate the use of virtual currencies such as bitcoins based on the report of an official committee that has suggested not to legalise them.

While welcoming the use of new technologies such as block chain, the committee is said to have proposed that the use of crypto-currencies should not be permitted in the country. It is also not in favour of a complete ban, but is understood to have recommended stringent provisions for regulating it.

“The committee constituted by the Finance Ministry has submitted its report. It is under examination,” said a person familiar with the development.

“It was felt that there is still not much understanding of what crypto-currencies are and how to use them in the country. Further, it has been seen that these currencies are used for speculative purposes,” said the person, adding that this was the main reason for the committee unanimously deciding not to legalise it.

Crypto-currencies have also been used in malware attacks, such as the recent Ransomware attack, and legalising them could lead to their use in more such incidents, the committee said.

In the background of lack of regulation on virtual currencies, including bitcoins, in the country, the committee said that government should put in place some norms.

“There can no longer be a vacuum over these currencies as they are being used, whether we like it or not,” said a second source.

The Finance Ministry is now looking at the recommendations of the panel and is expected to work with the Reserve Bank of India on the best way forward on the issue.

The market for virtual currencies, including bitcoins, has seen a significant increase over the last few years. The RBI has, over the years, advised users, holders and traders of such currencies of their potential risks.

In February, RBI had also said that it has not given licence or authorisation to any entity to operate or deal with bitcoins and virtual currencies in the country.

Finance Minister Arun Jaitley had recently informed Parliament that the committee included officials from the departments of Economic Affairs, Financial Services and Revenue (CBDT) and ministries of Home Affairs, Electronics, and Information Technology, RBI, NITI Aayog and State Bank of India.

“The objectives of the committee were to take stock of the present status of virtual currencies, both in India and globally, examine the existing global regulatory and legal structures governing virtual currencies, suggest a framework for regulation of virtual currencies, if considered, including issues relating to consumer protection, taxation and money laundering, among others,” he had said.

COMMENT NOW