Prakash Balakrishnan: There are Adequate Methods to Control Cryptocurrencies

It’s an article based on the viewpoint of Prakash Balakrishnan, the Head of International Financial Institutions Group, IndusInd Bank. Regulation of cryptos is better than banning, an excellent method to handle issues involving legal inexactness, be it smoking pot or crypto trading.

Though regulation of cryptos is not an easy task comparing conventional financial products. But the arguments surrounding cryptos are too risky for retail investors that seem increasingly unjustified, especially after the Paytm IPO. 

Crypto Labelling

One of the enormous challenges is the labelling of crypto under a known asset class. There seems to exist an intellectual tradition that cryptocurrency is a digital commodity, though the method seems imperfect. Bitcoin developers came up with that crypto is a currency and is planned to replace fiat currencies.

While a digital currency has few advantages other than a substitute option for payment settlement and value storage, a commodity has numerous applications, deriving its value from demand emerging. As crypto was invented to be leveraged as currencies and use-cases of cryptos are a currency substitute; hence they could be labelled as a currency.

LRS and AML

There is a regulatory space for people to invest in a foreign currency asset known as the liberalized remittance scheme (LRS), where cryptos are made of investment subsets under it. A natural outgrowth of explaining crypto as a foreign currency will be that it can no longer be used in India to break exchange control policies. 

Accounting, investment, and trading of cryptocurrencies for citizens can be centralized at the GIFT City with an option for excusing contracts and assets. Anti-money laundering (AML), taxation, transparency, and so on can be defined by banning investors from keeping cryptos in personal custody and making it mandatory to keep the assets in KYC-completed accredited depositories.