With the winter session of the Parliament officially kick-starting, I sat down with Subhash Garg, the former finance secretary who drafted the Crypto Bill to understand what has changed from 2019 to now. The description of the listed bill - The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 said that all private cryptocurrencies will be banned and that created a lot of panic among investors. What will be the future of cryotocurrencies in India, let’s find out
What does the government have a tough stance on cryptocurrencies? What are the concerns and do you see it being passed this session?
First of all, I am not so sure whether Crypto Bill is expected any day. The bill has still not been formulated. It has not been considered by the Cabinet and therefore I have even doubts whether this bill will get introduced. Though it’s a long session of four to five weeks, we need to wait for that bill to emerge. I hope it is not a big surprise because so far what we hear is that the government is probably dealing with only the currency aspect of it. The crypto economy and the services is a much larger business now, much larger economy now. And therefore we need to see if it can be confined to only one aspect of the currency.
So I think we need to wait and see what exactly is there.
You were the one who drafted the original crypto bill in 2019. What do you think has changed from since then?
That digital currency is an useful tool for the humanity, if I may say so. But there are certain issues we need to look at. Private players should not be allowed to issue currencies. If you allow one private entity to issue currencies, another can come up with more number of currencies or any other currency and it will create a problem.
This was the main issue with cryptocurrency and the Centre and the Reserve Bank of India are worried about this new phenomenon. And I would say rightly so.
You can not allow cryptocurrency as currency in India and 2019 draft bill largely focussed on that. The bill also proposed to introduce digital rupee or currency as an answer to the private digital currency.
However, the blockchain world of cryptocurrency is way bigger than currency today. Therefore, we need to take into account these aspects when we design the bill today rather than confining it only to currencies.
The description of Crypto Bill which will be introduced during the winter session in the Lok Sabha, said private cryptos to be banned. Any word on what will be banned and what will be left out?
I think this was perhaps a mistake. When you are not even ready with the bill, it is misleading to say that private cryptocurrencies will be banned and to intimate the government about the same. Ideally, the government should discuss with stakeholders and crypto investors and then formulate a bill.
This is a new emerging technologies, no one really fully understands it, whether in the government or in the private sector. Something like cryptocurrency and blockchain technology which has an an enormous future potential, needs to be discussed widely. Then, a decision can be taken keeping in mind India’s best interest.
Do we have a framework ready for RBI’s central bank digital currency?
That also is quite a complex question. There are two major experiments that are going around in the world with respect to the central bank digital currency. It must be noted that the central bank rupee is also central bank currency. The distinction is that this is physical rupee and that is going to be a digital currency.
Now, the retail digital currency would mean that the RBI and government is in the position to put this digital currency with 130 crore people in the country. They will be able to hold that digital currency in their digital wallets on their phones and they would be able to use their digital wallets to make payments.
It’s way more complex that it may sound. Everyone in India does not have a smartphone. How will you create digital wallet for those who use feature phones? A lot of issues need to be solved and discussed before bringing in RBI central bank digital currency.
The crypto industry body has been harping on the fact that each crypto has different use case just like websites and when you call all crypto as currency at large that’s problematic. Do you think that there is lack of understanding somewhere?
Lack of understanding is definitely there. The crypto blockchain world in my view, have three or four broad kind of things. There are further finer variations. One is of course which we have been discussing is the currency aspects. Even in the currency, there are three primary kinds of products.
One is Bitcoin kind of product of currency which is general currency. Now we have very large offerings of what we call stable coins. USDT which not many people in India know, is a stable coin which is now being internationally used and it has been equated with dollars. So one USTD is equal to one US Dollar. That is why this is called stable coins. It maintains in terms of that value. So anyone who thinks that the cryptocurrency is one uniform similar kind of phenomenon, and all these 8,000-9,000 currencies are similar, will be committing a big mistake. This is a very valid question. we must understand.
Is there a thinking about classifying cryptocurrency as an asset where it can be taxed like a commodity?
This is another big mistake. Cryptocurrency is crypto assets, crypto services and this is whole economy. You don’t classify the wheat that you produce, you don’t classify the clothes you produce, as assets. That is too much of oversimplification to treat this as an asset.
I think this is coming from exchanges who have limited interest. They are providing limited services. They’re not the crypto world.