The government takes enormous pride in making everything digital. It should perhaps apply similar principles to government committees which are taking longer than the pre-digital era to do their job.
This is the case of a panel that was set up in the beginning of November 2017 to “propose specific actions to be taken in relation to Virtual Currencies”. The committee has submitted its report, but with a delay of more than a year and a half.
The irony is hard to miss as its subject matter is virtual currencies (VC) where transactions take place at lightning speed. Cryptos are a subset of virtual currencies, but we will use it interchangeably with VC and digital currency in this piece.
According to the report, countries are divided into three categories when it comes to VCs.
- Those with no legislation or regulation on VCs such as US
- Countries having legislative or regulatory framework on VCs: Canada and Russia allow VC to be used for barter purposes, Switzerland and Thailand allow VC to be used for payment, but are lot legal tender, which means people are not liable to accept these as payments.
- Those that have imposed ban or restrictions on VCs such as China
The panel has proposed India to be in the third category and asked for a ban on all private VCs. It “recognises that while technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system, virtual currency in and of itself does not have any of the benefits associated with a fiat currency”.
As a student of banking and monetary history, one goes back to England’s Peel Act of 1844. Before 1844, the private banks could issue their own notes in England. After the Act, only the Bank of England was allowed to print banknotes. England followed this with disallowing private note issuance in India in 1861. Even historically, governments have not allowed private note issuances citing all kinds of fears as they cite today. How much times change and still they remain the same!
Amol Agrawal is faculty at Ahmedabad University. Views expressed are personal.