Crypto Cartels Flourish in India, while Union Govt Huddles To Find Regulatory Solution
Moneylife Digital Team 15 November 2021
Indian crypto ‘currency’ players are bombarding citizens with advertisements across platforms—doubling down on their marketing spend even when cryptocurrencies are yet to be accepted as legal tender and lack a legal framework and regulatory norms in the country. On Saturday, a meeting chaired by prime minister (PM) Narendra Modi reviewed issues related to cryptocurrencies in India. Last week, only Reserve Bank of India (RBI) governor Shaktikanta Das raised the alarm by calling cryptocurrencies a grave concern from a macroeconomic and financial stability point of view. 
 
According to reports, there was a consensus at the meeting that the government should not make any private digital currency as a legal tender since unregulated cryptocurrencies have exposed gullible Indians to financial risks. 
 
Quoting a person familiar with the matter, a report from Hindustan Times says, “While the Reserve Bank of India (RBI) is open to using the technology behind cryptocurrencies, it is not in favour of making them legal tender as these currencies are highly volatile and a threat to the financial stability. Most of the government departments concur with RBI, but they are under pressure from various lobby groups who want a status quo. A final view will, however, be taken by the top leadership.”
 
Unregulated crypto markets should not become avenues for money laundering and terror financing, people aware of the proceedings told the Economic Times
 
The high-profile review led by the PM comes ahead of a meeting of the parliamentary committee on finance with industry representatives and stakeholders on Monday on cryptocurrency.
 
Ahead of the committee meeting, its chairman Jayant Sinha, who is also the former minister of state for finance, had told reporters that representatives of crypto exchanges, Blockchain and Crypto Assets Council (BACC), industry bodies and other stakeholders would make their submissions on crypto finance. 
 
Quoting sources, a report from IANS says, after listening to the stakeholders' views, the majority of the members of the Parliamentary committee were of the opinion that the advent of digital currency is inevitable but it cannot go ahead without regulation.

During the meeting, the discussion led to a consensus that there is a need to have a regulator and there is a need for a regulatory mechanism for the same. However, as this is an emerging field, there was no clarity as to who or which department should be regulating it.

"The government representatives have been asked to appear before the panel and address the concerns raised by the Parliamentary panel," the sources added.
 
As reported by Moneylife, the Union government’s stubborn reluctance to ban or regulate the spread of cryptocurrencies through advertisements, paid influencers and content marketing to create the same cult-like mania promoted by multi-level marketing (MLM) companies and pyramid scheme operators tells its own story. (Read: Crypto Currencies Spread Like MLM Schemes while Government Watches in Silence)
 
In a memo outlining the summoning of a meeting of PM Modi and the crypto industry players late on Saturday, the government has clearly shown its displeasure over such mushrooming advertisements that promise wild profits.
 
The crypto stakeholders and the government have reached a consensus that such advertisements are misleading youths and must be curbed.
 
“The government is cognizant of the fact that [blockchain] is an evolving technology; hence the government will keep a close watch and take proactive steps,” according to the memo.
 
A recent advertisement by the Blockchain and Crypto Assets Council (BACC), a part of Internet and Mobile Association of India (IAMAI), and industry players like CoinSwitch Kuber, CoinDCX, WazirX and Zebpay, claimed that crores of Indians had invested over Rs6 lakh crore in crypto assets.
 
While crypto is spreading like wildfire in India, there is no regulation for it. Without specific approval from the Parliament and amendment in the RBI Act, private currency like crypto cannot be treated as valid legal tender. 
 
According to experts, a Bill on cryptocurrency is expected in the winter session of Parliament and, until the whole picture is clear, investing in cryptocurrencies can be dangerous. 
 
According to experts, robust mechanisms need to be put up to prevent innocent citizens from becoming victims, who do not fully understand the legal and policy ramifications, of an impending economic disaster.
 
Currently, RBI is the nodal agency responsible for all issues about crypto assets in India, thanks to a recent Supreme Court (SC) judgement. On 4 March 2021, the SC had nullified a circular from RBI that had banned cryptocurrencies. RBI’s circular on 6 April 2018 had prohibited banks and entities regulated by it from providing services to virtual currencies. 
 
The apex court ruling effectively lifted the ban on cryptocurrency trading in India, leading to the crypto craze in India. An increasing number of crypto platforms started luring the public into investing from as low as Rs100 into cryptocurrencies in an incomprehensible manner amidst the absence of a dedicated law on crypto assets and cryptocurrencies.
 
Meanwhile, a lawyer has filed public interest litigation (PIL) before the Bombay High Court, seeking directions to the Union government to formulate a comprehensive mechanism to rectify the risks involved in India’sargely unregulated cryptocurrency market. “There is no central authority to manage or control the value of cryptocurrency, unlike the normal currencies. The petition notes that the absence of laws and regulatory bodies in the realm of crypto trade might result in a scam of the magnitude of the 2013 NSEL case. The petitioner has also annexed an analytical study of cryptocurrency with the petition,” says a report from LiveLaw.in
 
Millions of innocent Indian users are risking their hard-earned money in highly-volatile cryptocurrencies that are not legal tender. Due to this, the country stands on the cusp of an economic disaster in the making as self-styled crypto cartels bombard citizens with misleading advertisements. At the same time, relevant government authorities quietly watch the whole saga from the sidelines.
 
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Comments
Kamal Garg
2 months ago
Adoption of block chain technology or for that matter any kind of technological disruption/innovations is always welcome. But this does not mean making crypto currency a legal tender.
What is a legal tender. It is an instrument which has a certain value (in domestic economy of any country, the value of a legal tender is at par as written on the legal tender) and can be exchanged for buying goods/services.
Probably crypto currency is a kind of barter wherein no body knows the underlying and legally exchangeable and convertible value. It all depends upon the whims and fancies of the buyer and seller. It is like in olden days, people used to "use" sea-shells / koris as legally exchangeable units, the value of which used to depend upon the whims and demand-supply of that particular good. And that's why major and large countries of this world has so far not made cryptos as the legal currency of their country.
Cryptos should never be made the legal tender in any country and never in India, at least.
parimalshah1
2 months ago
One important fact is missed by both RBI and government - The consumption of electricity to mine the cryptos. If we are serious about climate change, and 'Aatmanirbhar Bharat;, we need to embrace the block chain technology but must ban the cryptos. The amount of electricity needed to mine a single crypto coin is mind boggling - according to a journal article, estimated energy consumption of the bitcoin network to be in the order of 100 MW (which has been subject of debate). https://www.sciencedirect.com/science/article/abs/pii/S1877343517300015. So rather than allowing cryptos with regulation, permitting ild speculation - and waste energy, use the energy in manufacturing physical items needed by the world. Semiconductors is a good starting point.
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