By Rameesh Kailasam
Cryptocurrencies, as a sector, have gained significant traction over the months; the industry is here to stay and is seeing other companies benefit from its growth. But it faces regulatory uncertainty. In recent months, the industry has made concerted efforts to inform the ecosystem, including the government, of the various crypto and blockchain use cases, not only in terms of FDI, but also taxes, advertising, and employment in areas such as the journalism. , law, legal and accounting services.
The strategic importance of cryptocurrencies goes beyond their significant contribution to the $ 10 trillion economy that India can aspire to. The government is considering wealth creation in India, and this is an emerging investment class with a bright future.
There have been concerns correctly expressed by RBI that cryptocurrencies could be a potential motive for illicit activities. But don’t these risks emanate from any financial product / market or from any other asset class? Will this mean a ban on innovation and technology? Isn’t this an opportune time for the government and regulator to find solutions together with the industry, which would impose reasonable safety and liability restrictions?
A recent document from IndiaTech.org recommends tightening the checks and balances through which the industry could move towards collaboratively achieving regulatory recognition. While most companies prefer not to have regulation, it has been seeking regulatory clarity and legitimacy. The finance minister said the government is working on a cabinet note to introduce the relevant regulations, but fear, uncertainty and doubt persist. RBI is correct in ensuring that multiple misuse cases do not end up overwhelming the use cases emanating from private cryptocurrencies.
Adjustments to existing regulations, identification of cryptocurrencies as assets / commodities, clarity in taxes, KYC, disclosures, as well as AML, CFT and FEMA regulations are discussions that should be promoted with the participation of the industry.
Other jurisdictions are taking this opportunity to share this space. India has reached the point where the government must make its intent regarding cryptocurrencies clear, and there must be an inclusive discussion on regulating this space. An outright ban on cryptocurrencies is a negative outcome, both indirectly by encouraging their adoption in illegal markets and directly, as it means giving up one of the most promising avenues for the continued expansion of India’s technological relevance.
It is pertinent to note that many governments, including those of the US and China, have crypto assets, in addition to large global corporations. India can easily regulate cryptocurrencies. First, you should consider them as an investment class that could draw regulatory inferences for different classes that are current assets, stocks, gold, or commodities. Once this is clear, so will the rest of the regulation. As a nation, we cannot afford to have a scenario in which this category of investment exists unregulated.
Industry has a responsibility to adopt internal control practices and demonstrate the same to government. It is time for the industry to find ways to address all of the government and RBI concerns about cryptocurrencies, in areas such as KYC, trust, traceability, compliance, and suspicious transaction reporting mechanisms. It is equally important that the government engage with the industry and ensure an appropriate set of limited regulations to appease RBI. Without such a collaborative approach, it will be difficult to break through the regulatory uncertainty around cryptocurrencies and take advantage of the advantage that has been created through Indian founded and domiciled startups in this space.
The author is CEO of IndiaTech.org