A blanket ban on cryptos will encourage unregulated players and lead to unlawful use of such currencies in India, warned Blockchain and Crypto Assets Council (BACC), a part of the Internet and Mobile Association of India (IAMAI) that represents crypto exchanges based in India.
However, the BACC didn’t clarify what they meant by unregulated players when asked.
The BACC further said that they do not support the use of private cryptocurrencies as a real currency as it will undermine India’s monetary policy and fiscal controls. However, the body advocated its use as an asset. “The Council believes that a smartly regulated crypto assets business will protect investors, help monitor Indian buyers and sellers, lead to better taxation of the industry, and limit illegal usage of cryptos,” the BACC said in its statement.
The Council also urged the government to support efforts of the crypto exchanges so they can provide safe services to investors and ensure taxes are paid to the government.
“Crypto exchanges based in India offer an effective instrument of monitoring and are dedicated to creating an ecosystem that guarantees investor protection besides bringing both the investors and exchanges under proper tax laws,” the body added.
Industry experts believe in case of a ban on crypto exchanges, users will turn to peer-to-peer trading platforms that allow the transfer of cryptos from one user to another. They do not ask for any documentation for identity verification, which will make regulating the trade of cryptos near impossible for the government.
Industry experts have also pointed out that cryptos exist outside the purview of the governments, and even after a ban on cryptos and exchanges, the government cannot stop companies from listing new coins and users from buying or selling them.
Though trading in cryptos is not illegal until now, the recent comments by officials indicate that the government is mulling a blanket ban on private cryptos. The ban is believed to be a part of the government's parliamentary agenda for the upcoming winter session.
Early this month, Prime Minister Narendra Modi made an appeal to all democratic countries to work together to regulate cryptos and prevent their misuse. Reserve Bank of India Governor (RBI) Shaktikanta Das also warned that cryptos are a threat to India’s economic and financial stability. He also criticised the misleading TV commercials that promise huge returns on investments in cryptos.
The governments are also worried about the use of cryptos for illegal activities such as cybercrime and terrorism.
The IAMAI has played an instrumental role in reducing the perception of risks around cryptos in India. It moved the Supreme Court of India after the RBI issued a circular in 2018 that directed regulated entities including banks to not deal with cryptos. The apex court quashed the RBI circular in 2020.
In June, the body also proposed the formation of a self-regulatory code of conduct for member crypto exchanges.
India has the highest number of crypto owners in the world at 10.07 crore, as per BrokerChooser, a broker discovery and comparison platform.