In the legislative order of business for the budget session of 17th Lok Sabha that commenced today, the Government has listed a bill providing for the banning of all private cryptocurrencies in India such as bitcoin, ether, ripple and others. The bill also provides for the creation of a legislative framework on an official digital currency. An RBI booklet on payment systems issued on 25th Jan also showed that the central bank is exploring whether to issue a digital version of the rupee.
“Private digital currencies have gained popularity in recent years,” the central bank booklet said. “In India, the regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks. Nevertheless, RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and, in case there is, how to operationalize it,” it noted. A previous RBI ban on the use of bank channels for payments associated with cryptocurrency issued in 2018 was overturned by the Supreme Court in March 2020 creating a vacuum in the regulation of cryptocurrency in India.
An earlier government bill on cryptocurrency in 2019 reportedly sought to ban cryptocurrency and criminalise its possession in India. However it was not introduced in Parliament. A description of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the order of business said that certain exceptions to promote the underlying technology of cryptocurrency and its uses would be allowed. The past year has seen a surge in the number of cryptocurrency investors in India and in trading volumes. Cryptocurrency exchanges such as CoinDCX and Coinswitch Kuber have also raised early stage funding for their operations. The bill may spark an end to the nascent cryptocurrency industry in the country. The detailed text of the bill has not been released in the public domain so far.
Crypto industry professionals reacted to the news cautiously, asserting that bitcoin and other major cryptocurrencies were ‘public’ in nature and hence not within the purview of the ban on private cryptocurrencies in the bill. “Globally, cryptocurrencies such as Bitcoin, Ethereum are considered public cryptocurrencies because ot their open and public nature, where any participants can verify the transactions.
During the period of Banking Ban (April 2018- March 2020), in official communication from RBI, private was deemed as Bitcoin and other public blockchains. This was wrong classification. There has been no clear communication, on public and private classification even today in the bill. It must be explicitly covered,” tweeted Sumit Gupta, CEO, CoinDCX. “Over 7 Million crypto holders in India. Over $1 Billion+ crypto assets owned by Indians. Will Government ban & erase all that wealth overnight? I don’t think so. Government will involve us, the industry, in further discussions and we’ll present our points,” said Nischal Shetty, CEO, WazirX, a cryptocurrency exchange.