Govt should allow cryptocurrencies, says former Finance Secretary S C Garg

The Indian government should regulate and control cryptocurrencies instead of prohibiting them, former Finance Secretary S C Garg said.

Addressing a virtual event organised by Assocham, Garg added there is an undue emphasis on cryptocurrencies, and these digital assets will require standard frameworks.

"I don't think we still have full clarity and understanding about how to regulate cryptocurrencies... Regulate, control cryptocurrencies, but allow the crypto assets, encourage the crypto services," he said.

Cryptocurrencies are digital or virtual currencies, where encryption techniques are used to regulate the generation of their units and verify the transfer of funds, operating independently of a central bank.

The Reserve Bank of India (RBI) had virtually banned cryptocurrency trading in 2018 and had directed all entities regulated by the central bank to cease dealing in virtual currencies. The Supreme Court had asked the Centre in 2019 to frame policies for crypto, and in 2020, struck down the curbs imposed by the RBI.

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All Indian companies should only be keeping digital accounts in the next three to five years, Garg said, adding, "it is possible to integrate national accounts with company accounts."

In the times to come, the entire system of accounting, auditing, and reporting can be automated, he added.

"At present, we have this quarterly accounting system, whereby companies have to show their books of accounts after every three months. We need to set higher accounting standards and move out to an automatic accounting system, which would be relevant to the present needs of the business," he noted.

According to Garg, the current financial reporting standards are for the bygone industrial era, and there is an urgent need for complete digitalisation of accounting, financial reporting, and auditing for companies.

Speaking at the event, Chairman of Assocham Task Force on Accounting, Ashok Haldia, said financial reporting is the language of business, and there is a need to revisit accounting standards from time to time.

"Businesses are changing, so nothing can be looked at isolation. There are multiple stakeholders involved. These accounting standards need to reflect what it takes, and give back to society," he added.