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The Cryptocurrency Bill Should be Made Public for Consultation, says Former Finance Secretary Subhash Chandra Garg

Coin Crunch India held a Twitter space with former Finance Secretary of India, Mr. Subhash Chandra Garg who also chaired the Inter-Ministerial Committee (IMC) on cryptocurrency in 2019. The space was focused on clearing out the confusion of the stakeholders and the masses.

The Government of India has listed the Cryptocurrency Bill to be presented during the upcoming Winter Session of the Parliament.

This has created a lot of panic and confusion among the crypto community.

This article clears the smoke and gives an overview of the regulatory procedures and mechanisms.

Coin Crunch India reached out to former Finance Secretary of India, Mr. Subhash Chandra Garg who also chaired the Inter-Ministerial Committee (IMC) on cryptocurrency.

Meaning of Private Currency or Cryptocurrency

He firstly explained the term ‘private cryptocurrency’. 

The confusion among people is that the term private cryptocurrency has a different meaning in the crypto space than the definition provided by the Government.

In matters of lawmaking, the Government’s definition supersedes all other definitions.

Mr. Garg explained that any currency which is not issued by the Government or the Central Bank on the behalf of the Government is a private currency. Issuing a currency is the exclusive right of a sovereign (supreme ruler) entity which is the Government of a territory.

The same is mentioned in the report of the IMC.

Source: Inter-ministerial Committee

So, the Government does not mean private cryptocurrencies like Monero, ZCash, etc. when it uses the words ‘private currency’ or ‘private cryptocurrency’.

Blockchain can be public, private, permissioned, and non-permissioned. But in the context of currency, a private currency is the one issued by a non-sovereign.

He added that naming conventions can be fluid and flexible. But, as long as an appropriate definition is provided in writing, it should be referred to and accepted.

Recent Advertising Blitz

Mr. Garg revealed that he had issued a caveat to the crypto exchanges about the advertisement deluge they had planned. He told them that it could backfire too, which it eventually did.

Internet is flooded with get-rich-quick schemes which claim unusually high returns. Regulators are worried about such ‘crypto influencers’ as they could mislead the general public.

This is also the reason they reprimanded the crypto exchanges for their advertisements.

The Industry Players and Community Must Play Its Part

In India, any citizen can voice their concerns about any policy of the Government. Mr. Garg also advocates participation by the whole crypto community.

He proposes that the Bill should be made public, and consultations should be held with the whole community. 

He even suggested that the crypto players can draft their own Bill. But it has not happened.

Crypto as a New Category of Investment

Cryptocurrencies are an amalgamation of concepts of asset, currency, and capital. Creating a uniform category will require global conceptualization and cooperation as crypto has faded national boundaries due to its transnational nature.

In the national context, only the physical territory is included not the cyberspace.

That’s why crypto would require some kind of global governance mechanism.

The currency aspect of crypto will not be legalized, but the rest of the use cases should be allowed, as per his view.

Only the sovereign i.e. the Government has the exclusive power to issue a currency even if it is a digital currency.

Furthermore, he believes a whole new ecosystem will have to be established where cryptocurrencies can operate. For example, currently, the Information Technology laws are suited for technologies using centralized databases, whereas blockchain, being a decentralized database, needs a whole new set of laws.

Types of Cryptocurrencies and Introduction of CBDC

In his view, there are 3 types of cryptocurrencies.

  1. Cryptocurrencies as an end product – Bitcoin, the oldest cryptocurrency, is an example of this. It does not serve any other purpose than payments.
  1. Stablecoins – Cryptocurrencies backed by the sovereign currency of a country. USDT is a stablecoin backed by United States Dollar reserves. But it is issued by a private company, not the sovereign government.
  1. Currency used for internal network operations – For instance, Ethereum powers numerous Decentralized Finance (DeFi) protocols with its network. To interact with any project hosted on the Ethereum network, a user has to transact in Ether, the native currency of the network.

Mr. Garg believes that that with the increase in digitalization of the economy, it is time to dematerialize currency and bring in a Central Bank Digital Currency (CBDC).

With the introduction of CBDC, stablecoins will be wiped out from the market, he added.

Cabinet Has Not Considered the Bill

Maybe the Government is trying to achieve more clarity.

The Bill could be referred to a select committee, considering the complexity of the subject.

Many regulators such as the Reserve Bank of India are calling for a complete ban on cryptocurrencies.

But the Government might take its time to have a better understanding and may also consider the evolution of the space from just a fad to a huge industry.

Cryptocurrency regulation will open the floodgates for innovation and investment in India. This year several startups have turned unicorn and also had their Initial Public Offering (IPO). With India’s abundant pool of developers and entrepreneurs, the country has a big opportunity to capitalize on. 

At the same time, the Government has to take care of the masses who could be misled by high returns of meme coins. So, the financial literacy of the country will also play a huge role in regulation. 

Moreover, cryptocurrencies stand counter to the traditional fiat currency. Adoption of cryptocurrencies will not be quick whether as an asset or currency or any other class. It will take several rounds of deliberation to come to a conclusion.

You can listen to whole conversation with Mr. Garg here.

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