On December 7th, 2018 the Government panel, which was appointed back in November 2017, to draft the norms for the Virtual currencies recommended a complete ban on the Bitcoin and other cryptocurrencies in India. The report was submitted to Finance Minister, Arun Jaitley by the panel which was headed by Subhash Chandra Garg, secretary, department of economic affairs (DEA).
Now, there has been a complete U turn on this issue as a second interdisciplinary committee set up by the Indian government is considering making cryptocurrencies legal in the country again but with more stringent rules. This has come up after a long tussle as RBI through the Master Direction earlier in 2018 suggested that
“Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. However, Virtual Currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.
Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time. A circular in this regard is being issued separately.”
The second interdisciplinary committee is likely to submit its report in February, 2019. As reported by many Indian News Agencies and as per the conversation between a senior official who attended the panel told New Indian Express
“We have already had two meetings. There is a general consensus that cryptocurrency cannot be dismissed as completely illegal. It needs to be legalised with strong riders. Deliberations are on. We will have more clarity soon,”
If we see the background of how regulations have been shaping up in India, The first interdisciplinary committee was set up in Match, 2017 which was led by Special Secretary Dinesh Sharma (Retd.) and the committee consisted of members from different ministries including Ministry of Electronics and Information Technology, RBI, Ministry of Home affairs, NITI Aayog and SBI. Their committee reported recommended a complete ban on Cryptocurrencies in India with immediate effect. Even, the income tax department also suggested the panel that the government should ban cryptocurrencies which was followed by a word of caution from the Special Investigation team appointed by Supreme Court on black money saying that the centre should not legalise cryptocurrencies.
Thereafter the RBI came up with a Master Direction which rendered cryptocurrency as not a legal tender. After that the Ministry of Finance also had a similar opinion opinion which was come out in the open in December 29, 2017 and this was given more stress when India’s Finance Minister, Arun Jaitley made a reference about it in the Budget Speech. He was quoted saying
“The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system,”
However, as reported by various news agencies,
“the stakeholders in crypto world challenged the RBI’s circular in the Supreme Court. After conflicting opinions, the government set up the second inter-ministerial committee, led by the Department of Economic Affairs secretary Subhash Chandra Garg.”
It is also necessary to note and as reported by Bitcoin Magazine
Some members of the second committee also attended the G20 summit in Buenos Aires, where crypto measures such as taxation and increased regulation to combat the use of cryptocurrencies for money laundering were discussed.