Don't Vacillate on a Framework to Regulate Crypto Assets in India

We must catch up with others and institute an oversight mechanism that can assure investors the safety of their investments

- SUBHASH CHANDRA GARG is former finance secretary of India.

In early 2019, a committee I headed as secretary, department of economic affairs, proposed a law for digital currencies that would lay down the statutory base for a blockchain-based crypto assets ecosystem. There was no follow-up on it, and India still has no statute or regulation that defines 'crypto assets' and the rules of running a crypto business in the country.

In the meantime, the world has moved rapidly towards mainstreaming crypto assets and cryptocurrencies. The US Senate recently passed the GENIUS Act, legalizing privately issued dollar-backed stablecoins. The market value of cryptocurrencies now exceeds $3.25 trillion. If all cryptocurrencies are taken as a single currency, it would be the world's tenth largest by value.

Can India continue to ignore crypto assets? Why should India not go about building a sound statutory and regulatory ecosystem for them?

The consequences of inaction: I have closely watched India's crypto ecosystem over the past decade. Despite the absence of regulations, many crypto exchanges were set up. Operating outside the law or in a grey zone without a legal framework, they flourished for some time by conducting an incoherent mix of legitimate and illegitimate transactions. Then crypto gains were brought under the tax net, trading almost collapsed, and some frauds came to light.

GainBitcoin, a Ponzi-style multi-level marketing scheme that ran from 2015 to 2018, allegedly duped thousands of investors of an estimated ₹6,600 crore by promising fixed monthly returns of 10% on Bitcoin deposits, leaving scheme subscribers with worthless 'market capitalization' tokens. The Central Bureau of Investigation has been investigating it and conducting raids.