Crypto assets: over-regulation should be avoided

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Cryptoassets and cryptocurrencies are global paradigms and by banning them in India they cannot be removed.

The way the crypto ecosystem has developed in India has been just one remarkable example of success. Indian interest in crypto is increasing with each passing day. From the days of demonetization, when Bitcoin was at a low level to its subsequent high levels, we have seen a massive increase in the value, price and speculative price structure of the crypto ecosystem. More and more cryptocurrencies are entering the market. Cryptocurrencies have appealed to the imagination of the Indian investor. More and more people have started to invest in the crypto ecosystem. This is also evident from recent figures in the public domain. However, the point is that India needs to focus specifically on the legal and policy frameworks related to cryptoassets and cryptocurrencies. At the time of writing, India does not have a dedicated legal and policy framework for cryptocurrencies and cryptoassets. India’s only digital legislation is the Information Technology Act, 2000, which is India’s cyber law. This Indian legislation is important because it deals with all aspects relating to data and information in electronic form. Furthermore, this legislation is special legislation and its provisions prevail over anything inconsistent with it, contained in any other law currently in force. However, the legislation and its amendments under the Information Technology (Amendments) Act, 2008 does not mention Bitcoins or Blockchains. In fact, this law is over 20 years old and it was over 13 years since it was last amended. The last decade has seen the maximum growth of cryptocurrencies and cryptoassets. The Reserve Bank of India (RBI) circular withdrawing banking services from entities engaged in crypto-assets and cryptocurrencies has faced a significant legal challenge. Ultimately, the Supreme Court of India overturned the Reserve Bank of India (RBI) circular but upheld the role of the Reserve Bank of India (RBI) in regulating aspects relating to cryptocurrencies. Since then, there has been relative silence when it comes to Indian policymaking concerns about cryptoassets and cryptocurrencies. Now there is news that the Reserve Bank of India (RBI) is offering its own Indian digital currency. However, India needs to take a legal stance on how to approach cryptoassets and cryptocurrency regulation. Therefore, we realize that there is a political vacuum in India in this regard. At the time of writing, the cryptocurrency bill is expected to be presented to Parliament in its current winter session. Initially, there was a thought process that India wanted to ban all private cryptocurrencies. However, recent reports suggest that there is now a shift in the government’s thinking process to put aside the issue of the crypto-asset ban and come up with a more favorable framework. It is a step in the right direction. We need to understand that banning cryptoassets and cryptocurrencies is not a legal and pragmatic option. This is because cryptoassets and cryptocurrencies are global paradigms and by banning them in India they cannot be removed. Additionally, India should avoid taking an ostrich approach to crypto-asset policy making. A better approach will be to treat the various crypto properties as crypto assets and then deal with their enabling regulations. India does not need to reinvent the wheel. A number of other countries already have particular experience in legislating on various Blockchain and Bitcoin issues. For example, Malta is known as the Blockchain Island of the World. He already has three legislations dedicated to Blockchains and clearly has his own distinctive legislative experience in the regulation of Blockchains. Additionally, Belarus also had separate crypto-asset legislation and developed its own mechanism for regulating crypto-assets. India could learn not only from Malta and Belarus, but also from the experiences of Estonia and Switzerland to come up with its own personalized legal approaches to cryptoassets and cryptocurrencies. I understand India’s reluctance to recognize cryptocurrencies. However, nothing prevents the Indian government from legally regulating cryptoassets in an enabling manner. India must realize that the Blockchain and Crypto ecosystem is going to play an important role in further propelling the growth of the Indian economy. Rather than turning a blind eye to such an emerging phenomenon, it would be better for India to take a holistic approach to crypto regulation. However, over-regulation or over-killing is a phenomenon India must carefully avoid. How this process of regulating crypto assets evolves in India will largely depend on how the Indian government views the potential growth of the crypto ecosystem in India. This is a very interesting space to watch as the government comes up with new legal frameworks and legal initiatives regarding the crypto ecosystem in India. Dr Pavan Duggal, Attorney, Supreme Court of India, is an internationally recognized expert authority on cyber law and cybersecurity law. He is also president of the International Commission on Cyber ​​Security Law. You can reach him at [email protected]. www.pavanduggal.com

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