The committee appointed by the government last year to examine issues related to cryptocurrency has submitted its report and is examining pros and cons, including launching of its own cryptocurrency, said a top legal affairs ministry official said at an ASSOCHAM event held in New Delhi earlier this week.
Addressing the second Global Summit on P2P Digital Asset System, organised by the Associated Chambers of Commerce and Industry (ASSOCHAM), Anadee Nath Mishra, Additional Secretary, Department of Legal Affairs, Ministry of Law and Justice, said the government is also looking into the allegations that people who had black money had diverted the same to cryptocurrencies in India during demonetisation in 2016.
It was reported that during demonetisation, lakhs of people had used illegal money in bitcoins and that was one of the main factors responsible for the sudden increase in the price of bitcoins. The government is also examining the use of black money, said Mishra.
There has been a phenomenal increase in recent times in the price of virtual currencies (VCs) including bitcoin, in India and globally. The VCs don't have intrinsic value and are not backed by any kind of assets. The price of bitcoin and other VCs, therefore, is a matter of mere speculation resulting in spurt and volatility in their prices. There is real risk of investment bubble of the type in ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard earned money. Consumers need to be alert and extremely cautious as to avoid getting trapped in such ponzi schemes, Mishra said.
VCs are stored in digital/ electronic format, making them vulnerable to hacking, loss of password, malware attack etc. which may also result in permanent loss of money. As transactions of VCs are encrypted they are also likely being used to carry out illegal activities such as terror-funding, smuggling, drug trafficking and other money-laundering acts, added the additional secretary.
He said, there was report that people who couldn't convert their money use this channel to launder their illegal money and it could have been one of the reasons for sudden rise in the value of bitcoins. The Income Tax (IT) department has also carried out enquiries and notices have been given to numbers of people who have transacted in bitcoins and have been asked to make payment of taxes if they had made any profit out of it.
The policy of government of India is extreme cautious right now but we are actually calling it illegal but there is always difference between legality and tax availability, said Mr Mishra.
He also said that government wants digital technology but block chain technology should help businesses..technology is welcome. Lets people do business in a legal way.
As the theme Speaker at the ASSOCHAM event, Subharansh Rai, Co-founder and COO of EthxPay, a Delhi based Bitcoin exchange, said, "Government should start recognising this business sooner than later to dispel confusion related to government policy regarding status of crypto-currency business in India."
"Neither the Government nor the Reserve Bank of India (RBI) have officially clamped down the business of crypto-currency, but recently individual Bitcoin traders and exchanges appear to be bearing the brunt of a campaign that has already begun to impact crypto usage across the country as banks are choking bitcoin by blocking deposits and withdrawals. This should not happen till norms are in place," added Mr Rai.
Augusto Montiel, Ambassador of Venezuela said, blockcahin technology can bring positive change in quality, efficiency and productivity. Blockchain technology enables a strong authentication process. He said, Venezuela is currently working on an oil-backed crypto currency called Petro.
He said that the Venezuelan government has investment worth 9.5 billion dollars of barrels of oil to back the new crypto currency.