Proposed private cryptocurrencies ban 'backward looking', say experts

New Delhi: The ban proposed by an inter-ministerial on private cryptocurrencies is backward looking and a setback for companies mulling to launch their own virtual currencies on the lines of Bitcoin, said experts on Tuesday.

The panel headed by Economic Affairs Secretary S C Garg, in its report made public Monday, recommended banning of private cryptocurrencies and criminalising any activities related to virtual currencies.

It, however, pitched for introduction of an official digital currency with a status of a legal tender and appropriately regulated by the Reserve Bank of India.

"...the proposal by a government panel to ban crypto is backward looking. Bans don't serve much purpose and only drive users to try and circumvent the law. Bans also hamper productive innovation and risk leaving the country behind if crypto indeed evolves to become a bigger part of the financial system over time," said Gaurav Jalan Founder & CEO, mPokket.

Prashant Phillip, Partner, Lakshmikumaran & Sridharan Attorneys, too expressed a similar opinion if the ban is imposed, it would be a severe setback for private corporations which had planned to introduce their own versions of cryptocurrencies in India. "Previously, China had also completely banned the use of cryptocurrencies. With the proposed ban, it remains to be seen whether other nations would follow the same," he said.

Rachit Sharma, DGM, Taxmann, said the recommendations is in line with the models of Financial Acton Task Force, an intergovernmental organisation.

"FATF's report on virtual currencies advocates on risk based supervision of the crypto currencies as they are very vulnerable to money laundering and terror funding activities due to existence of greater anonymity in crypto currencies," Sharma said.

However, Prashant Garg, Partner, Data and Analytics, EY India, said the proposal does not affect the industry at large which is leveraging blockchain technology for positives. EY has been focusing and will continue to promote Digital Twins and Distributed Ledger Technology (DLT) backed by fiat money, he said.

"The regulation takes India away from speculative use of technology and paves way for beneficial use of technology and thereby propagates a trusted, auditable, secure digital business ecosystem. There are many positives with the move and certainly it help in breaking the perception that DLT/Blockchain is Cryptocurrency or vice versa," he said.

Besides Bitcoin, several other cryptocurrencies have emerged, including Ethereum, Ripple and Cardano.

As of now, there are around 2,116 cryptocurrencies, with a market capitalisation of $119.46 billion.