India should regulate trading of virtual currencies through monitored exchanges
That the ground has shifted since an Inter-Ministerial Committee set up to study the issues related to virtual currencies first proposed the ban in 2019 is beyond doubt. From the emphatic assertion in that panel’s report that “no country across the world treats virtual currencies as legal tender” to a situation where earlier this year El Salvador — admittedly a small and heavily indebted nation — officially declared ‘bitcoin’ as legal tender, much has changed in the adoption of private virtual currencies worldwide. The pandemic has accentuated the global embrace of all things digital and investment in the technologies enabling cryptocurrencies including blockchain, appear to be no different. Canada, Japan and Thailand permit the use of virtual currencies as a payment method, with some jurisdictions regulating them as a digital asset, and others as a commodity. Canada and the U.S. closely monitor virtual currency activity to ensure they do not run afoul of laws on financial crimes, with the former also earning tax revenue on transactions. All things given, India should eschew the temptation to join China in proscribing virtual currencies and instead aim to tightly regulate their trading through monitored exchanges and earn revenue. Simultaneously, it should expedite the RBI’s pilot of the Central Bank Digital Currency so as to offer an alternative to cryptocurrencies.
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