“Blockchain in India got off on the wrong foot”

Subhash Chandra Garg, India’s former finance secretary, said blockchain’s potential will be recognized and adopted in India, but it has so far been overshadowed by the government’s opposition to the use of cryptocurrencies linked to the new technology.

“Blockchain was always seen as something innovative, but it’s so deeply masked with the asset or (crypto)currency side that it’s been difficult so far to separate the technological innovation,” Garg said Discard in an exclusive interview.

Garg, who served as India’s finance secretary in 2019 from March 1 to July 25, said blockchain technology is superior to traditional database technology in organizing assets and many other types of services.

“My feeling is that this is the future,” he said, “And many businesses, assets and even personal interactions will shift to this. This is going to be perhaps the biggest and best innovation that has been made to make the human society to a digital society, said Garg.

Enemy at the gatepp

However, blockchain technology arrived in India associated with Bitcoin as a “currency substitute” for a sovereign or fiat currency, threatening the control of the government and the central bank, Garg said.

“And so the whole system was gearing up to stop the enemy in their tracks,” Garg said, putting the benefits and services that blockchain can generate in the background, he added.

The Reserve Bank of India, the country’s central bank, has said it is seeking a complete ban on cryptocurrencies, while India’s Finance Minister Nirmala Sitharaman imposed a flat 30% tax on all crypto income.

If this wasn’t enough, India imposed a 1% tax deducted at source on all crypto transactions above 10,000 Indian rupees (US$126), with no provision to offset losses made in one cryptocurrency with gains in another.

“The impact of this taxation has significantly increased the compliance burden on the stock exchanges,” Garg said.

The restrictions in India and the global fall in cryptocurrencies over the past couple of months have led to a slowdown in crypto transactions in the country, Garg said.

But, “I see that this (blockchain) is unstoppable. This will change the world. Unfortunately, India has taken a more messy and difficult position, which will hurt their (blockchain’s) arrival, its mainstreaming. But it will come in time.”

Garg said technology adoption is driven more by its fundamental value, not government permission, and blockchain and cryptography technology will do well in India as citizens are well-wired to handle information technology.

Long live crypto?

However, Garg said that sovereign currencies will remain because currencies need value stability. This can be achieved by controlling access to the currency as well as interest rates, among other measures.

In contrast, Garg said, no one in the private sector has the ability to control the value of cryptocurrencies and manage them in a macroeconomic setting to take care of the economy, inflation or deficits, recessions, growth and similar concerns.

“Cryptocurrencies as a general currency outside of their platforms are not a good option,” he said, “Cryptocurrencies as a general currency will not survive, they will not work.”