Dr. Daleep Pandita
Government of India is now seriously contemplating banning transactions using cryptocurrency which is a form of virtual form of currency, in our country. Based on comprehensive study conducted by a designated committee, Reserve Bank of India ( RBI ) has very recently made strong recommendations to the Union Finance Ministry for immediately banning the cryptocurrency in India. Even for the second time ” The Cryptocurrency and Regulation of Official Digital Currency Bill – 2021″ was deferred by the Parliament , that under the pressure of hidden investors, at least proposed to levy taxation on such transactions thereby indirectly legitimizing the introduction of this type of currency in our country. As virtual currency does not hold any legitimate status in India, despite the fact that lot of Indian investors have already joined this fray, is contrary to the totally accountable ongoing digital mode of payments which is increasing day by day assuming the preferred mode of financial transitions in our financial system.
Born in the year 2009, cryptocurrency transacted through more than 5000 meme coins with commonly used Bitcoin and Dogecoin, is basically devoid of any intrinsic value having neither any legal entity nor redeemable for some amount of another commodity and does not have any physical form. Without any control by the financial regulator of a country, the circulatory system of meme coins is privately individualistic without involvement of a third party as evident by its name – cryptography. With a hefty strength of more than $ 2 trillion, cryptomarket has not seen any kind of volatility so far that is frequently witnessed in equity markets, thus this bull market has earned sufficient trust and confidence of investors without the fear of losing money on this platform. Currently this virtual currency has evolved as a critical part of international economy by becoming secure and comfortable means of financial transaction across the globe ultimately emerging as a dependable diversification tool of investment portfolio.
In India, the concept of cryptocurrency was basically conceived after the demonetization which shook the financial confidence of the people on flat currency and it actually gained momentum during COVID pandemic in which digital mode of payments became regular mode of financial transitions. Despite the undue pressure created by unwanted lobby of more than 80 lakh less exposed cryptoinvestors, temporarily luring our political system under the false ambit of much needed rapid economic development, these illegal unauthorized financial transactions are still continuing unabated.
Although it has been always the demand of our financial system to critically analyse the pros and cons of this form of economy before legitimizing and introducing it in our system. As on date cryptocurrency is not considered to be a legal tender like that of a flat money issued by Government of India but as of now need financial authorization and legality in our country.
Financial instability, hidden transactions, lack of control by the regulators, unfair utilization of funds including misappropriation, increase in economic crimes, promoting financial frauds, enhancing cyber crimes, evading taxations, violating foreign exchange principles, money laundering and importantly abetting terrorism activities due to cross-border transactions are some of the important drawbacks which makes crytocurrency transactions highly risky and dangerous for our country. So if cryptocurrency is not risky preposition for the investors but it is equally unsafe and highly volatile for our overall financial system and not recommended in the interests of national safety and security for a country like India. Realising such drastic consequences, even countries like China, Gulf nations, Turkey and some of the European countries have already banned the circulation of cryptocurrency in their economy.
Although in the year 2018, RBI directed our banking and non banking financial institutions not to allow any kind of transaction involving investment in cryptocurrencies, the much needed move that drove many crypto exchanges out of business in India. Now again on the basis of detailed study conducted by a designated committee constituted by Reserve Bank of India for the said purpose, it has reaffirmed its earlier commitment of immediately introducing ban on the introduction of cryptocurrency in Indian financial system. Instead lessons need to be drawn from the experiences of those countries already banning cryptocurrency, which can be of immense assistance in legislation with adequate teeth for curbing this menace posing serious internal and external threats to economy and to our nation, thereby sending a strong message to the unauthorised lobby of hidden investors promoting in risky and dangerous cryptocurrency business in India.
(The author is senior executive from Government of India PSU)
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