India’s proposed crypto bill seeks to ban private cryptocurrencies but promote the underlying technology – the blockchain.
India might be introducing a bill on cryptocurrencies—The Cryptocurrency and Regulation of Official Digital Currency Bill.
The bill states that lawmakers could vote on legislation that creates “a facilitative framework for creation of the official digital currency” issued by the country’s central bank, the Reserve Bank of India (RBI). Moreover, the bill proposes the prohibition of “all private cryptocurrencies” except for assets, such as virtual currencies issued by the country, that “promote the underlying technology of cryptocurrency and its uses.”
The same bill had appeared on the parliament’s agenda earlier in February 2021. When it was announced then, Indian crypto traders panicked and assumed that the government was planning to introduce a blanket ban on “private cryptocurrencies”. Subsequent to the announcement, people began to panic sell, which led to a drop in prices of cryptocurrencies. Also, Bitcoin in India was trading at a steep discount of up to 20% compared to a premium of 10% a few days before the announcement. The bill was listed again on the agenda but was not brought to the fore in the parliament’s winter session.
India’s Finance Minister, Nirmala Sitharaman confirmed that the pending bill is still waiting for the Cabinet (India’s highest decision-making organization) to sign off. The bill will be different from its 2019 draft, which sought to ban all crypto-related activities in the country.
Crypto investors worry about a blanket ban
Many investors in the Indian crypto trading community have been worried about the purported ban on crypto trading. The vague wording in the bill and lack of clarification from the government did not help.
Sunil Prabhu, a reporter of India broadcaster NDTV, said that the bill would regulate cryptocurrencies as crypto assets, with the Securities and Exchange Board of India (SEBI) overseeing the regulation of local crypto exchanges.
Private wallets may also be banned, so investors would have to declare their crypto holdings and transfer them to exchanges regulated by the SEBI within a specific time frame.
Experts’ take on crypto regulation in India
With the proposed bill, the Indian government hopes to crack down on crypto scams. Founder and CEO of cryptocurrency exchange Cashaa, Kumar Gaurav, believes the bill could prevent illicit activities in the industry and “let innovation in the industry grow and thrive” under a progressive regulatory framework.
Having met with representatives of crypto exchanges, blockchain and Crypto Assets Council (BACC) among others, the Parliamentary Standing Committee on Finance puts forward that the country should regulate but not ban cryptocurrencies.
The creation of digital currency
The bill also announced that the Indian government would be creating an official digital currency backed by the RBI similar to its fiat currency, the Indian rupee.
This plan is influenced by how major economies, such as China, have already reached a trial phase for their own digital currency. Countries that adopt their own independent digital currency first would have significant advantages (such as enhancing the country’s financial security by tightening system firewalls and controlling money flow), and India does not want to fall behind.
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