Multiple government agencies are at play to catch the crooks in the cryptocurrency world. The income-tax department has slapped notices. The Enforcement Directorate is probing whether foreign exchange laws were violated by transferring funds to foreigners by sidestepping banks. And, recently, at least two large exchanges were raided for suspected GST evasion. A law on cryptocurrency does not exist. And no one knows whether lawmakers would have the patience to navigate the crypto maze to frame one. Till then, the various arms of the state would snoop around to check if the crypto actors – exchanges, brokers, custodians and other platforms – are breaking the present laws of the land. There is nothing wrong in that. After all, even if cryptos are outside the law, they are not above the law.
But having let cryptos flourish in the wilderness, the government, somewhat unwittingly, is now working backwards. Left with no choice, it is letting enforcement actions guide the lawmakers – when it could have been the other way around. First, it ignored cryptos for years till it couldn’t. Second, it underestimated the complexity of cryptos and failed to redraft the old Bill that talked about banning cryptos to table a new Bill in time. And, today, neither the crypto bourses nor investors have a clue what the new Bill would say – or whether there would be one.
If the government thinks that unlike a separate law that was passed for International Financial Services Centres, there is no need for a new Bill, and cryptos can be accommodated as an asset by changing various laws – which anyway have to be amended even if there is a Bill – it should spell it out sooner than later. It may be naive to bet that cryptos would soon wither like tulips.