MUMBAI| BENGALURU: A recommendation to ban virtual currencies is a “regressive step” and reflects “poor understanding” of distributed ledger technology, the technology underpinning crypto currency usage, according to startups and investors operating in the space.

The move by an inter-ministerial panel also drew flak from global investors.

Tim Draper, founder of DFJ Venture Capital, said, “India’s government banned Bitcoin, a currency providing great hope for prosperity in a country that desperately needs it.”

The committee, led by Economic Affairs Secretary Subhash Garg, has proposed jail terms of up to 10 years for anyone indulging in crypto activities like mining and trading. It also suggests the elimination of ‘crypto assets’ from the payments ecosystem.

“The government should not decide where one is investing his or her money in. They can always complete the KYC process of individual investors to stop activities like money laundering and so on, but banning will be quite a regressive step,” said Nakul Saxena, an investor in the space.


Crypto currency could solve multiple issues in cross-border payments, he added.

Tanvi Ratna, a US-India Fellow of the New America Foundation and a blockchain policy researcher, said there was not enough understanding on crypto currency usage in public blockchain systems designed for payments.

“The government wants to ‘eliminate the use of crypto assets…in payments systems…but aggressively promote blockchain technology,’ which they think can dis-intermediate transactions without crypto — this is a big red flag right from the start. Poor understanding of the innovation,” Ratna said.

The panel only looked at virtual currencies, without classifying the underlying technology into common categories like currencies, securities and utilities, as it was done by the US Securities and Exchange Commission and the Financial Action Task Force, she said.


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