Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration pictureThe Indian information technology industry body has opposed the recent proposal of the government's inter-ministerial committee to ban all cryptocurrencies barring those that are backed by the central government.
The National Association of Software and Services Companies (Nasscom) said on Tuesday, "Instead, the government should work towards developing a risk-based framework to regulate and monitor cryptocurrencies and tokens. A ban would inhibit new applications and solutions from being deployed and would discourage tech startups. It would handicap India from participating in new use cases that cryptocurrencies and tokens offer."
It further said a ban is more likely to deter only the legitimate operators as they have no intent to be non-compliant.
Last week, a government panel, tasked with examining virtual currencies, recommended outright banning of private cryptocurrencies in India, with imprisonment of upto 10 years for anyone dealing in them.
"To address consumer protection concerns, cryptocurrency-based businesses can be tested in the regulatory sandboxes being launched by the financial sector regulators across the country. We should work towards creating a regulatory framework that will constantly monitor and prevent illegal activities. Regulating would allow the law enforcement agencies to be better equipped to understand these new technologies, enable them to gather intelligence on criminal developments and take enforcement actions," Nasscom added.
The panel also suggested that a federal digital currency should be examined and that the government should keep an open mind.
The committee has however recommended that the technology behind cryptocurrency, distributed ledger technology (DLT), whose most common application is block-chain, can be of great benefit to India in several financial and non-financial areas, such as trade financing, lowering the cost of know your customer (KYC) and improving access to credit.
Nasscom welcomed this suggestion and said it would engage with the government in considering how DLT can be used in India.
"We will continue working with government stakeholders and seek more discussions on this issue," it said.