Cryptocurrency regulation is needed for investor protection, says SC Garg

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With the massive crash in cryptocurrencies on Wednesday, almost a trillion dollars worth of wealth got eroded in a matter of hours. Bitcoin crashed by 30% touching a low of $30,000. Since then, the prices have recovered and is currently trading at above the $40,000 level. The high level of volatility has put the spotlight on cryptocurrencies and the need to regulate them.

“Crypto-assets, excluding currency part, by nature is a volatile asset. There is no real value. The prices surge by demand and supply kind of situation. If the demand is increased by corporations such as Tesla for whatever reason prices go up. Similarly, when the sentiment goes down it crashes. No regulation can prevent the fundamental attribute of the asset. The regulation is needed for investor protection rather than preventing busts and booms,” S C Garg, former finance secretary who headed the inter-ministerial panel on cryptocurrencies told Money9.

According to Varun Sethi, a blockchain lawyer, these crashes should not be looked at from the perspective of stock markets.

“Stock markets are highly regulated. Crypto markets are 24×7 and global, which can lead to a massive change in prices. What these crashes teach us that the current state of assets is more centralised than it is. From that perspective, it goes to show that it is a centralised market. Similarly, these kinds of crashes may not be fully controlled because of the nature of the asset. I think whitelisting certain exchanges, wanting a legal opinion before listing, are the steps that are needed for bringing investor protection in the country,” Sethi said.

On the question of the new panel being formed by the government on cryptocurrency, Garg said, “ In 2019 when the panel was made the concern was its use in the payment system. The asset part was much less on the horizon at that time. The recent crash is partly attributed to the Chinese decision of now allowing payment as currencies. It is difficult to separate currency and asset part which leads to a regulatory problem. I think the 2019 committee part did not deal with the asset part. It would be quite good from the investors’ point of view if this new panel deals with the asset part.”

Responding on the regulatory part Sethi said, “We have to see how other nations are evolved. What I feel is that there are three nations that are doing a lot many things. One is the US, UK and Singapore. Most of the developments from a regulatory perspective are happening in these three locations.

Watch the entire conversation here