Thursday, May 19 2022
Economic Affairs Secretary Ajay Seth, who works on cryptocurrency policy, has warned investors about virtual digital currency, saying there is no underlying value and exchanges that trade them deal is not regulated.
“The finance bill has sought to clarify taxation, but that does not mean that all policy options are on the table. Everything is on the table – be it prohibition, regulation, etc. , but it is a separate aspect, which takes time due to the complexity and the nature of the asset,” he told TOI in an interview.
What is the plan on sovereign green bonds?
It will be part of the global borrowings and will be drawn on the internal market. Our sense is that there is a class of investors who have the desire and appetite to put money to greener uses, but who might be looking to settle for a slightly lower return than of the market. Some pension or other funds have a mandate to invest in certain sectors. The challenge for us is to put a credible framework on sectors and projects so that the money is only used for green projects and helps the economy move towards a lower carbon path. So far, government borrowings can be used for anything, but we’re going with a specific bond. I don’t expect that to be a significant proportion of the overall borrowing, but it will be a substantial number.
What is the legal status of crypto-assets?
FM clarified that taxation has nothing to do with government policy on crypto assets. The finance bill has sought to clarify taxation, but that does not mean that all policy options are ruled out. Everything is on the table – whether it is prohibition, regulation, etc., but it is a separate aspect, which takes time due to the complexity and nature of the asset. These instruments are created in the digital world and are traded in the digital world and they are not designed for the following jurisdictions in the country. This requires international cooperation and a general understanding of the direction countries wish to take. We are engaged in consultation with institutional players, whose mandate is macro-economic stability.
In the absence of a regulatory framework, what is the investor protection mechanism?
Investors should be aware of the risks and appropriate advice is provided. The Governor of RBI and the Chairman of Sebi have spoken out, and the Ministry of Finance, through press releases, is warning people that these are purely speculative assets. They do so at their own risk. They get into assets that have no underlying value. Stock prices also go up and down, but behind that are the profits of a company. In case of crypto, there are no gains, only pure speculation. Concerns about the entry of digital assets into the economy generate their own sets of risks, which are real and need to be addressed. Indian financial markets, in terms of regulation or use of technology, are among the best in the world. Exchanges, Custodians and Settlement are three separate functions and are regulated by Sebi. But, in case of crypto exchanges, everything is combined into one. We don’t know their ownership or governance, whereas in the case of exchanges such as BSE or ESN, rules are in place. If you put in too many regulations they will just budge, or if you ban things may change. These are under discussion.
Is there under-budgeting for possible entries on small savings?
This year, we expect around Rs 6 lakh crore inflow. But in a typical year it is in the range of Rs 3-4 lakh crore and in 2022-23 we expect around Rs 4.25 lakh crore in inflows from the perspective that people will find d other equally attractive investment avenues. But if that doesn’t happen, market borrowing will decline.
Are the growth and inflation projections conservative?
In 2022-23, retail inflation will be within the policy range, maintaining all factors including commodity prices and the global rupee tightening. WPI should moderate due to base effect and commodity prices should decline due to monetary tightening.
Foreign exchange reserves aside, how prepared are you for a global liquidity crunch?
It’s a risk, but it’s not a big risk because the Indian economy is in a very good position to withstand it. We are in a position that we have never had in the past. We have high foreign exchange reserves and exports are doing well.

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