Cryptocurrencies May Be Recognized As Commodities In India

News, Regulation | July 12, 2018 By:

The government of India may not ban cryptocurrencies entirely, an unnamed senior government official told news outlet Quartz.

The government official said a Finance Ministry panel has ordered a study on cryptocurrencies, which may suggest that India would treat virtual currencies as commodities.

“I don’t think anyone is really thinking of banning it (cryptocurrencies) altogether,” the official said. “The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as (a) commodity may let us better regulate trade and so that is being looked at.”

The official added that the panel’s main concern is keeping track of investors and funds in order to curb money laundering and illicit financing.

“Trade is not a criminal offence. Most of us trade in various asset classes in the stock market,” the official said. “So how is this (cryptocurrency trading) any different? What has to be in place is a mechanism to be sure that the money used is not illegal money, and to track its source is the most important thing.”

R Gandhi, former Reserve Bank of India (RBI) deputy governor, believes that treating them as commodities would clearly demonstrate to some investors that cryptocurrencies like bitcoin are not real currency.

“If these are used to settle transactions, then it acquires the nature of currency,” Gandhi said. “So that is one thing that one needs to be wary of. But if people want to invest in a commodity then that is different, because then we can assume that they are aware of the risks involved.”

In an interview with news channel ET Now last month, Subhash Chandra Garg, India’s Economic Affairs Secretary, said that the draft regulations are likely to be wrapped up in the first fortnight of July. The upcoming crypto regulation is expected to include legal requirements for know your customer (KYC) procedures and record keeping for transactions.