Govt plans framework to regulate cryptocurrencies by fiscal year-end

Subhash Chandra Garg, secretary, department of economic affairs, at a CNBC TV18-Mint event on Budget 2018. Photo: Ramesh Pathania

The government will come out with a framework to regulate cryptocurrencies by the end of this financial year, as it looks to clamp down on rapidly growing virtual currencies such as bitcoin.

“We hope that within this year, the committee would finalize its recommendations and then it would require legal changes, regulatory assignments, but certainly there will be regulations by the end of this financial year,” Subhash Chandra Garg, secretary, department of economic affairs, said at a CNBC TV18-Mint event on Budget 2018.

In December, the government had constituted a committee headed by Garg to study the impact of cryptocurrencies and to make recommendations to regulate them. Other members of the panel include Securities and Exchange Board of India chairman Ajay Tyagi and Reserve Bank of India deputy governor B.P. Kanungo.

Another committee had been set up before this to make recommendations on regulating bitcoin, but its report was never made public.

Finance minister Arun Jaitley said in his budget speech on Thursday that the government was opposed to cryptocurrencies, given that they could be a channel for money laundering and terrorist financing.

“The government will take all measures to eliminate use of these crypto assets in financing illegitimate activities or as part of the payment system,” Jaitley said.

Reiterating the government’s stance on cryptocurrencies, Garg said: “The exchanges which have been set up currently are not regulated exchanges. They are in a way self-set up, self-regulated. There are no legal or statutory requirements for conducting the KYC (know your customer), there are no records of the transactions.

“When you move to a system of regulated exchanges for crypto assets, then you have a proper trail,” he added.

Last year, the income-tax department conducted raids at as many as nine bitcoin exchanges in the country. During its investigations, the department looked for evidence to establish the identities of investors and traders, and transactions undertaken by bitcoin traders in India.

According to Garg, transactions taking place using crypto assets which are legitimate will be regulated to make them transparent.