India may form a new committee to study the possibility of regulating crypto: Report

A change of heart? According to reports, the government of India may form a panel of experts to study the possibility of regulating cryptocurrency in the country.

The Economic Times reported the news on Tuesday, citing "three sources privy of the discussions." The discussions are said to be at an early stage, and no formal commitment has been made yet.

The new committee could suggest ways to regulate crypto as digital assets instead of a currency. This view has commonly been shared by crypto exchange operators in India, as The Block reported recently.

India's previous crypto committee, which was headed by former finance secretary Subhash Chandra Garg, had recommended a blanket ban on crypto in 2019. Those recommendations are now said to be outdated, and the government could freshly assess the matter.

"There is a view within the government that the recommendations made by the Subhash Garg [committee] are dated and a fresh look is needed at use of cryptos rather than a total ban," an official familiar with the matter told The Economic Times.

A new crypto panel

India's junior finance minister Anurag Thakur could be part of the new crypto panel, per the report, among a dozen other members. Thakur is said to have met with members from the crypto and banking industry forums in this regard.

India's finance minister Nirmala Sitharaman recently said that the government would take a "calibrated" approach in regulating crypto, but she did not specify details at the time.

The finance ministry is now reportedly monitoring the growing volume of crypto trading in India. Sitharaman's team is expected to brief her later this month around ongoing developments in the crypto space.

In March, the government of India was scheduled to discuss a crypto bill, but that was postponed for unknown reasons. That bill is now expected to be discussed in the upcoming monsoon session of Parliament, which runs from July to September. But it is not clear whether that bill's contents match the 2019 draft bill by the Garg committee that had recommended banning crypto in almost all forms.

Garg himself now seems to be in favor of regulating crypto as an asset class. He recently said that "crypto assets as assets perhaps can be one area where the government can look at, but with lots of caveats." But using it as a currency should not be allowed, he argued at the time.

Overall, the crypto situation in India remains murky to date. In 2018, the Reserve Bank of India (RBI) passed a rule that restricted banks from dealing with crypto clients. The Supreme Court of India overturned that rule in 2020.

Yet, crypto participants in India are now facing further difficulties as, reportedly, the RBI recently urged banks to cut ties with crypto exchanges and traders. Crypto exchanges, including WazirX and CoinSwitch Kuber, have suspended rupee deposits for new users on their platforms after some banks severed ties with them. Still, crypto exchange operators in India remain hopeful that the government will consider regulating crypto as an asset class.