The central government was first in favor of regulating bitcoin and crypto but was forced to propose the ban due to pressures from the Reserve Bank of India (RBI).
It has been reported that the Economic Affairs Secretary Subhash Chandra Garg, head of the interministerial committee in charge of studying cryptocurrencies, was actually in favor of regulating them. He considered Bitcoin as an “economical phenomenon” that would have produced better results if it was monitored instead of banned.
The central government was initially in favor of "regulating" cryptocurrencies instead of imposing a Ban. DEA Secy Garg pressed for accepting virtual currencies as an economic phenomenon. According to Business Standard @someshjha7 #BitcoinSahiHai #IndiaWantsCrypto pic.twitter.com/QmmQWk53hS
— Sohail Merchant (@inkparadox) July 23, 2019
Garg said in a first committee meeting held on November 27, 2017, that a ban on the cryptocurrency sector could prompt its players to migrate underground, that would, in turn, lead to more illegal activities.
Garg proposes that the government should categories cryptocurrencies such as bitcoin as commodities or financial assets. But RBI disagreed with the Garg committee proposals.
At the following meeting held on February 22, 2018, the RBI proposed a total ban on bitcoin and cryptocurrencies. Afterward, the RBI implemented a law that ordered all the Indian banks to stop offering their services to cryptocurrency exchanges.
The RBI adopted its anti-bitcoin stance soon after Arun Jaitley, the Finance Minister of India at that time, said in the parliament bitcoin is not recognized by their government as legal tender. Jaitley also said that they will enforce eliminating the use of bitcoin entirely.
RBI Deputy Governor BP Kanungo and then Central Board of Direct Taxes (CBDT) Chair Sushil Chandra were both in favor of Jaitley’s position.
But Garg did not agree with their views. He reminded them that several countries, including South Korea, that first tried to ban bitcoin later changed their mind as imposing a ban on bitcoin were difficult.
“Secretary (EA) said that the option of banning can be looked afresh and asked RBI and CBDT to prepare draft law which might be needed to be prepared in case banning option is accepted. Using cryptocurrencies in payment systems may be banned but not in its entirety considering the nature of technology.”-was read at the meeting.
Ajay Prakash Sawhney, the Ministry of Electronics and Information Technology Secretary, agreed with Garg stance, stating that India’s status as an IT-driven country must not miss out on a tech development such as cryptos.
Two drafts were circulating online, one supporting a ‘bitcoin ban’ draft and another which was for regulating crypto and allowing them to be legal. The bitcoin ban draft was made public online earlier this week.
Featured Image: CoinDesk