Contradictory statements and media leaks are making it impossible to get a handle on India’s soon-to-be-unveiled cryptocurrency policy. The uncertainty is throwing young blockchain firms and programmers into a paroxysm of anxiety: Should they leave or stay? If they hang back, should they do something else with their lives?
The risk that India would hit back with a new law to make criminals out of crypto professionals and investors was always present. So practitioners tried to educate policymakers, appealing for sensible regulation starting with definitions for what is a utility token, which digital asset is to be viewed as a security, and which is to be treated as a currency.
The trouble is with bureaucrats. They say they want blockchain, but not cryptocurrencies. It’s as silly as wanting airports with duty-free shops but no flights. From the Reuters story, it doesn’t appear that the final regulation will be much different from what a draft bill had recommended in 2019. A government panel report, which had provided the backdrop for the draft legislation, said that authorities would be fine with distributed ledger technologies for delivery of any services, or “for creating value,” without involving cryptocurrencies “for making or receiving payment.”
Such a dichotomy will be messy in practice. Take international money transfers, where costs pile up because of payment messages that have to laboriously jump national borders by using correspondent banks. To provide value, the service provider will need to employ virtual payment tokens, something that the Philippines and Bangladesh are already allowing. India, the world’s largest recipient of overseas remittances, won’t want to miss out.
To see where India might be going with its policy flip-flops, consider something else Sitharaman said at the conclave. A lot of the experiments that fintech firms are doing in blockchain, she said, will be taken up “in a big way” in the offshore financial center in Gift City in Gujarat, Prime Minister Narendra Modi’s home state. A startup meet is planned there, she said.