17,000 new credit cards issued by ICICI linked to wrong users

Regulating cryptocurrencies will not be an easy mandate. Banning them altogether would be draconian. The ‘calibrated approach’ will need some fundamental questions answered.

Can India afford to reject a new technology idea? The answer is no. Blockchain is the order of the day and it must be embraced.

Should cryptocurrencies be legal tender? No. Replacing the sovereign payment system has no advantages. Moreover, unlike USA, UK and even Singapore that have a regulatory framework on cryptocurrencies, India does not permit full capital account convertibility. This would mean RBI has little or no role to play.

Incidentally, China too rejected crypto as legal tender sending Bitcoin crashing 30%. India and China put together would be one third of the world rejecting cryptocurrency as a payment instrument, and hence a better bargaining power at defining the new playbook.

Crypto an asset class? Perhaps yes. Legal participation in a global asset class for Indians with risk appetite is good. The regulator, whoever it may be, should take no sovereign guarantees here. It cannot when the system is decentralised and not backed by a physical underlying commodity.

So, with RBI out of the fray, is SEBI the right regulator? The answer here is a yes and a no.

Stock markets are highly regulated, and SEBI has done a commendable job in adding transparency and method through corporate governance, robust exchanges and forthright investor redressal processes. It was possible with asset classes such as stocks as they are centralised. With cryptocurrency, even though it has its own market-like exchanges, the fundamentals are different.

A new turf will need new rules and a new referee.

Technocrats who understand technology, tax officials to ensure stringent adherence to tax laws and legal eagles to negotiate plausible domestic and geographic disputes will make for ideal candidates. For its experience in fair trade, SEBI must have a seat on the regulatory panel too to ensure these private exchanges within India that handle millions of transactions worth billions would not fail investors.