BT Exclusive: Banning crypto not the solution, but need progressive, pro-innovation-led regulation: Amitabh Kant

With the legislation on cryptocurrency in the works, NITI Aayog chief executive officer Amitabh Kant said that investors' interests must be protected considering that 1.8 per cent of the Indian population was already invested in the virtual currency until 2021.

The government is expected to take the comprehensive bill on cryptocurrencies for cabinet clearance to table it during the winter session of the parliament, beginning November 29. The bill is expected to outline the classification of cryptocurrencies, their regulation, and to fix a tax slab on earnings generated from them. The implementation of the provisions will likely be made a part of the Finance Bill 2022-23.

In an exclusive interview to Business Today, Kant said that banning cryptocurrencies was not the solution and that there was a need to look at a 'moderate pro-innovation-led soft touch regulation' in the emerging sector.

"There is a massive adoption of cryptocurrencies or crypto assets as a store of value. From the retail and institutional investors' point of view about 1.8 per cent of India's population has invested in crypto until 2021. That's a growth of over 2.2 times over the previous year. And, therefore, what is becoming evident is that crypto, both from the technology and investor viewpoint, is rapidly picking up in India," said Kant. "What we need to ensure is that the interests of the investors are protected and concerns surrounding the misuse of the technology are fully addressed," he added.

The 1980 batch IAS officer pointed out that as per the NASSCOM crypto tech industry report, more than 230 start-ups in the cryptocurrency space are mushrooming in India with almost $270 million invested in Indian blockchain and crypto start-ups.

Kant said that the government should call for participation of the aspiring and mature tech talent pool of India in the innovation cycle that crypto offers in the newly emerging decentralised web 3.0 ecosystem. "So, banning it is not the solution for innovation but risk mitigated legal framework is the solution," added Kant.

The Supreme Court in early March 2020 nullified the RBI circular banning cryptocurrencies.

"I feel that there is a need for pro-innovation-led soft touch regulation in this emerging sector. We should learn from best practices across the world and we should learn from global regulatory templates," said Kant.

He added that regulation of crypto space was important to ensure that those who have already invested are not cheated by the crypto exchanges.

"The regulation has to be brought in by the government which should be a progressive regulation. Which would be a pro-innovation regulation," said Kant.

Final call on the issue will be taken by the ministry of finance.

According to officials in the know, the cryptocurrency legislation will put in place the taxation structure of these currencies where capital gains will apply in case of income from these and GST is levied on other services.

The government is looking to classify crypto as an asset class, as demanded by the crypto exchanges, rather than as a currency.

Last week the Standing Committee on Finance, headed by former minister of state for finance, Jayant Sinha, met the representatives of crypto exchanges, the newly formed crypto industry body Blockchain and Crypto Assets Council (BACC), CII, and Assocham among others. While committee members flagged concerns and the need for regulations, banning the currency was not discussed.

Prime minister Narendra Modi had said last week that all democratic nations must work together to ensure cryptocurrency "does not end up in wrong hands, which can spoil our youth".

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