The much-awaited Government of India report on blockchain and virtual currencies is finally available for the public.
A high-level Inter-ministerial Committee (IMC) was constituted on2nd November, 2017 under the Chairmanship of Secretary, DEA to study the issues related to Virtual Currencies and propose specific action to be taken in this matter. The mandate of the Committee included an examination of the policy and legal framework for the regulation of virtual currencies. The subject of virtual currency is complex owing to its unique features and varying degree of understanding in different jurisdictions
The 10 most important issues covered by the report are:
Blockchain is important
The report states that blockchain / Distributed Ledger Technology (DLT) is “an important new and innovative technology, which will play a major role in ushering in of the digital age”. The advantages of using DLT are mainly seen in terms of reducing administration and transaction costs, obviating duplication and improving the accuracy of data, improving the speed and efficiency of transactions and detecting fraud.
Financial sector regulators examine the uses of DLT
The report recommends that financial sector regulators examine the uses of DLT in processes that can be incorporated by banks, insurance companies, securities exchanges, etc. in their functioning.
Use cases for blockchain
The report lists several use cases for blockchain / DLT including payment systems, Know-Your-Customer (KYC), insurance, land registries, loan issuance & tracking, e-stamping, trade financing, post-trade reporting, securities and commodities, and internal systems of financial service providers.
Regulatory agencies must explore use of Blockchain
The report recommends that blockchain / DLT use cases should be explored by the Department of Economic Affairs, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA), and Insolvency and Bankruptcy Board of India (IBBI).
Ministry of Electronics and Information Technology
Ministry of Electronics and Information Technology (MEITY), and Goods and Services Tax Network (GSTN) must play a major technology supportive role for exploring and building the uses of DLT for enabling trade financing by enabling the growth of trade invoicing through DLT.
SEBI must evaluate the use of DLT for initial public offerings
SEBI must evaluate the use of DLT for initial public offerings (IPO) and follow-on public offers (FPO) as an alternative to the present system of issuances. SEBI must also examine whether the depository systems can move to a DLT based system.
State governments must examine the feasibility of using DLT
The state governments must examine the feasibility of using DLT for land-records management.
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Central Bank Digital Currencies
The report is very positive towards “Central Bank Digital Currencies” and recommends keeping an “open mind regarding the introduction of an official digital currency in India” and recommends that such a currency should be regulated by the Reserve Bank of India.
Cryptocurrencies should be banned in India
Cryptocurrencies should be banned in India as they are created by non-sovereigns, have no underlying intrinsic value and suffer from extreme price fluctuations. It is recommended that all exchanges, people, traders, and other financial system participants be prohibited from dealing with cryptocurrencies.
Imprisonment up to 10 years
The report proposes imprisonment up to 10 years and fines up to Rs 50 crore for provisions of the proposed law titled “Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019”.