In a stark contrast to the draft bill on “Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019″ submitted a couple of months ago by an Inter-Ministerial Committee constituted in November 2017; a Report of the Steering Committee on Fintech Related Issues 2019 acknowledges the positive aspects of innovations like cryptocurrencies and Initial Coin Offerings.
Although this Committee was also chaired by Mr. Subhash Chandra Garg, the then Secretary of Department of Economic Affairs (DEA) under Ministry of Finance (MoF), it was constituted in March, 2018. This Committee also had Representatives from RBI and SEBI on its board. Deputy Governor of RBI and Chairmen of SEBI were among its Members:
While the earlier Committee report suggested a complete ban on Cryptocurrencies in the country, this 150 pages report on Fintech issues begins with a discussion on cryptocurrencies, blockchain technology and ICOs. It states:
The mechanisms surrounding cryptocurrencies, particularly the Blockchain and Initial Coin
Offerings (ICOs), are revolutionising the global fintech landscape. The issue of initial coin
offerings has emerged as an innovative way of capital raising by fintech businesses.
It observes the strong capabilities of digital token system as:
Use of digital tokens resolve the issue of multiple currencies, improves liquidity and
capital compliance costs, allows for micro-payments and expedites the payment process, which
further eliminates liquidity risks.
It also tries to give a definition for Digital Tokens and classifies cryptocurrencies into Utility Tokens and Security Tokens.
This is the first report by a Government body that talks about the positive aspects of cryptocurrencies and ICOs in so much detail.
However, it just seems to be a study and observation of developments in fintech space and this Steering Committee has not suggested any positive move to regulate cryptocurrency industry.
To me it occurs that it is only trying to make a case for Private or permissioned blockchains (only limited to stakeholders), esp. for cross border payment application. It also takes note of this 2017 news regarding Corda DLT development by R3: R3 and 22 banks build real-time international payments solution on Corda DLT platform.
Conclusion / My comment:
In conclusion, the media hype about some positivity around cryptocurrency in Indian Government on the basis of this report that was recently submitted to our Finance Minister is just that - hype. However, it is important to note that with this report, Government is finally trying to understand and acknowledge that cryptocurrencies has far broader dimension than just as a payment system or an alternative to fiat currency. This probably may help strengthening the IAMAI argument in the ongoing case against RBI in Supreme Court.
- What do you think about the significance of this development?
Steering Committee Report published on official D.E.A. website