Ms. Nappinai, a renowned lawyer, specializing in constitutional, criminal, IPR and cyber laws also has a passion for legal aspects of Blockchain and emerging technologies.
Interview Date :12th March 2020
We cannot apply Online rules to Offline Real World
I have heard a crypto evangelist talk about how your entire life can run without a footprint in the real world. You may claim all of this, but at the end of the day, each of us as human beings who are dabbling in technology are anchored to the real world. As much as we want to say that we don’t live in this world, and we don’t need regulation, but when you shut your computer and step out on the road, don’t you need your government to protect you physically? If the same anarchy that you want online were to exist offline, where would you as a human being be? I wonder why we are averse to regulation, and so averse to central authority when it is the same authority or regulation that we turn to when it comes to protecting our physical self.
If Crypto becomes a new payment method, Fiat will be Abandoned
The RBI and the government were probably not that concerned of the decentralization aspect, as they were of the fact that if cryptocurrency can be used as a payment system, then it is actually a threat to fiat currency. Moreover, issuance, regulation and control of currency which is a sovereign right can also be threatened. It is not about the decentralized part, but about the manner of usage of cryptocurrency. If cryptocurrency is going to be used as a payment mechanism, then in just a year or 2, fiat currency will be abandoned and there will be no value to the fiat currency. It is a legitimate concern that governments have. If cryptocurrency can threaten their sovereignty, then they need to decide on whether they should allow it or not in, and in what context. Today, when you look at the global trends, all the jurisdictions which allow cryptocurrency effectively have taken away this risk factor of threatening the sovereignty of their country. They made sure to allocate or push away cryptocurrency into the realm of securities instead of payment systems, and as a security or utility token, they can relax as it is not imposing a threat to their sovereignty. Nevertheless, they are not missing the boom on this new evolution, technology and this new opportunity which the youngsters seem to love.
3 Types of crypto groups in India now
I have not noticed an immediate jump up from anyone going to the government saying “let’s get started”. I think everybody is waiting and watching in India. Another thing that happened during the ban period was that a lot of exchanges moved out of the country because they couldn’t function in India without the important access to a banking or payment system. There were 3 different types of crypto groups; those who were already invested in cryptocurrency, those who were already traders in cryptocurrency and not necessarily exchanges but taking benefits from exchanges that were based out of India, and lastly there are the exchanges who may or may not have moved out. So, today when we are talking about a reversal to the position before the issuance of the circular on April 6th 2018, it is going to take a bit of time, because these people need to apply for revival of their connections. Banks and payment systems are also going to do a “wait and watch”. They are not going to immediately sanction everything, and they will go through a process as well as wait and see if RBI is indeed going to go forward with the review or not, Or if any new circular is going to come up.
Protection Remedy has to be Available
One of the arguments that I had put forward for regulating cryptocurrency was high hack risk and huge losses. In India particularly, on one hand there was the issue of whether the public could invest in cryptocurrencies or not, on the other hand there were crimes pertaining to cryptocurrency. There are numerous incidents where a crypto wallet has been hacked and was cleaned out, or an exchange has been hacked and cleaned out. There were also scams in the name of blockchain or even cryptocurrency. You have to be able to give protection to the users or the public that have invested, and there has to be a remedy that has to be available to them. General laws provide user protection remedies to a large extent but there is still fear in the minds of crypto enthusiasts particularly because of all the RBI circulars warning them. Hence scams go unpunished and investors are left without remedies for redress. In such instances, it is imperative that victims have remedies in law and the confidence in the system to seek such remedies. For such cases as well as others pertaining to emerging technologies there are remedies under special and general laws already existing. For instance, in India we have the Information Technology Act, 2000, which was the first codified cyber law but that is not the only cyber law in India. I call the cyber laws for India a scattered jigsaw puzzle, because a little of it is in a certain act and a little bit is in the general laws. We need to put the puzzle together to know what the full picture of the law was all about. That’s what I attempted to do in my book on cyber laws and tech laws titled “Technology Laws Decoded” (https://lexisnexis.in/Technology-Laws-Decoded) and I want people to know that you can take resort to existing laws that are there for your protection.
Be clear in whatever you decide!
Once people know that dabbling into cryptocurrency by itself is not wrong, then they will have confidence to come forward to file cases if they fall victim to fraud, scams or hacking attacks. Today, everybody who has dabbled into cryptocurrency seems to think that they are in the gray area. They don’t know where they stand with respect to the law and they don’t know that by filing a complaint, if the law is going to go after them or the criminal. That’s why we need clarity and certainty in law with respect to cryptocurrency. If the government wants to say “no sorry, ban it all, off with their head” so be it, but say it so that the public at least knows where they stand. Otherwise, please regulate and give some confidence to the market, especially to blockchain enthusiasts who should know that they can move forward including for an incentivized mechanism. Blockchain adaptation will grow and flourish in India only if the government ensures clarity and encourages and enables its growth.
KYC systems to be ramped up for banking systems also
Anonymity as opposed to traceability, is the understanding that most people have of cryptocurrency. They think it provides anonymity, but it actually provides traceability. There may be anonymity with respect to the individual’s personal information i.e., those who are behind the transactions, but not the transaction itself. It is the traceability of transactions that enables the decentralized system to function through validation of each transfer. When we talk about traceability, then we are explicitly talking about not just the transaction, but of the persons behind it at the same. If you allow cryptocurrency exchanges, then they effectively remove the anonymity layer. You already have traceability with respect to cryptocurrency, and when an organization is doing your full KYC, then anonymity of the persons behind a transaction also goes with that. So, effectively you have the same transparency as you would have in fiat currency transactions through banking systems.
In fact, I would say that banking systems have not been as effective as we would like them to be on traceability considering the number of scams that are here in India tagged under phishing attacks. Most banking or credit/debit card and even digital wallet frauds launder out money using another bank account. Why is the money trail not leading to the criminal then if the KYC of a banking system is working in such situations is a good question to ask, because it’s not really working to the extent that we would want to. There are no perfect systems, and we will have to evolve as threat scenarios come up. We need more awareness and digital literacy among users and transparency and easily accessible remedies against such frauds and scams. I feel that when it comes to cryptocurrency and traceability, the crypto enthusiast will not want traceability beyond what is already there. This is the dilemma here. They like their anonymity. The argument which I am putting forward is that you need regulation and it is good for the community even if this may not necessarily be attractive to a crypto enthusiast.
Interviewer , Editor : Lina Kamada
The Article published on this our Homepage are only for the purpose of providing information. This is not intended as a solicitation for cryptocurrency trading. Also, this article is the author’s personal opinions, and this does not represent opinion for the Company BTCBOX co.,Ltd.