Former DEA Secy Garg proposes allowing cryptos as commodity with rules

Reiterates the view that they should not be regarded as currency

Subhash Garg, former department of economic affairs (DEA) secretary, and head of the Inter-Ministerial Committee on Virtual Currencies, on Friday said the government should regulate crypto as an asset or commodity and not as a currency.

In a webinar organised by Credit Rating for Exchanges, Blockchains and Coin Offerings (CREBACO), in association with leading law firm Khaitan & Co, Garg said even the draft Bill proposing to ban crypto currencies, like bitcoin and others, doesn’t talk about using crypto as an asset or commodity.

Hence, with the required regulations, the government should permit crypto assets, he said. Garg added that, “While I stick to what we said in the report of the virtual currencies committee, the crypto asset is anybody's right to create. The value lies in the eyes of the holder.”

This observation by Garg is seen as a positive sign by the crypto industry because he had proposed ban on it as currency as head of a government committee on virtual currencies. Now, he is saying that there is scope to allow its use as an asset with regulations.

Garg said, “It is the government’s duty to protect the gullible people. The people who don't understand need to be protected.”

He favoured demat (dematerialisation) of the official currency, that is, the rupee.

In March this year, the Supreme Court rescinded the Reserve Bank of India’s (RBI’s) diktat to banks of not allowing them to deal with exchanges providing trading facilities in crypto or virtual currencies.

This has paved way for trading in these currencies again. In fact, banks are opening accounts of virtual currency platforms.

The panel discussing the subject with Garg was categorical in saying that cryptos should not be allowed as currency. He is, however, a big supporter of blockchain and supports its use in financial markets.

Sidharth Sogani, founder and chief executive officer (CEO), CREBACO Global Inc, said, “Don’t be scared of crypto and ban it, instead help it grow. When there is something so new, the knowledge is derived by practical experience, not by a set of books. A lot has to be done.”

Nischal Shetty, founder, WazirX, a platform facilitating crypto trading, said, “After the lockdown, people wanting to know and understand about crypto currencies has increased four times.” 

This shows that people are still interested in virtual currencies.

Sanjay Khan Nagra, partner, Khaitan & Co, discussed the possibilities of crypto asset as a commodity as it may attract GST. He said that if the government starts regulating cryptocurrencies even as an asset or a commodity, that will be a good beginning in a long journey.