The report says that it would be advisable to “have an open mind” regarding the introduction of an official, government-backed cryptocurrency in India
The committee set up to look into the legality of cryptocurrencies and blockchain has submitted its report to the Finance Ministry and recommended that private cryptocurrencies be banned completely in India.
It has also drafted a law, the ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019’, which mandates a fine and imprisonment of up to 10 years for offences. The committee, however, said the government should keep an open mind on the potential issuance of cryptocurrencies by the Reserve Bank of India.
The government had constituted an Inter-Ministerial Committee on November 2, 2017, under the Chairmanship of Economic Affairs Secretary Subhash Chandra Garg and comprising senior officials of the Ministry of Electronics and Information Technology, SEBI and the RBI. “The committee notes with serious concern mushrooming of cryptocurrencies almost invariably issued abroad and numerous people in India investing in these,” the report said. “All these cryptocurrencies have been created by non-sovereigns.”
The report went on to highlight the fact that cryptocurrencies do not have any intrinsic value of their own and lack any of the attributes of a currency. That is, they neither act as a store of value nor are they a medium of exchange in themselves.
“Therefore, the Committee is of clear view that the private crytocurrencies should not be allowed,” the report said. “These cryptocurrencies cannot serve the purpose of a currency. The private cryptocurrencies are inconsistent with the essential functions of money/currency, hence private cryptocurrencies cannot replace fiat currencies.”
The Committee, however, leaves the door open for the central bank issued cryptocurrencies, adding that it endorsed the RBI’s stance of banning any sort of interface of cryptocurrencies with the banking system in India.