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The Central Government is set to table the bill- The Cryptocurrency & Regulation of Official Digital Currency, 2021 during the ongoing Winter Session in the Parliament. Previously supposed to be presented in the last Budget Session this is the second time that the Bill is set to be presented before the Parliament.

The contents of the Bill, in its entirety, are not well-known and will only come to light once the Bill has been presented to the Parliament. However, they are similar to those that had to be presented in the prior Session. 

Accompanying the announcement of the crypto Bill, there has been a lot of speculation regarding its contents. All that is currently known is that the government is planning to create a positive regulation that is a “Facilitative framework towards the creation of the official digital currency issued by the Reserve Bank of India (RBI). The Bill seeks to prohibit all private cryptocurrencies, but allows for exceptions to promote the underlying technology of cryptocurrency and its uses”.

What concerns the Government?

With no definite legal recourse for transactions involving cryptocurrency, the Reserve Bank of India believes that cryptocurrencies pose a serious threat to the nation’s financial security and stability, and cybercrimes.

  • Hyperinflation

  • Terror financing through the Dark Net

  • Medium towards a rise in Drug-Trafficking

  • Money Laundering 

  • Evasion of Taxes

What will the Bill Entail?

Though there isn’t much that is known, the following is the information we have on the contents of the bill;

  • Ban Private cryptocurrencies

  • Framework for creation of digital currencies by RBI 

  • Exemption to promote underlying crypto tech

  • Tackle threats to National Security

  • A broad definition encompassing Cryptocurrencies

 

Was cryptocurrency already Banned? 

A circular issued by the RBI in 2018 put restrictions on the use of cryptocurrencies due to cases of fraud involving virtual currencies. The ban was set aside by the Supreme Court. Moreover, the RBI reiterated this stance amidst reports of banks and other commercial institutions citing the previous circular and not allowing its’ users to use cryptocurrencies. Through another circular dated May 31st, wherein the use of cryptocurrencies with due diligence was allowed. 

Is a Crypto ban Practicable?

The announcement of the proposal had investors scrambling to ensure what move to make next. It was received in a positive as well as a negative light. Those seeing it as a positive sign believe that crypto trading requires legislation just as any other business. Also, the right kind of awareness and education is necessary, along with an overall balanced approach towards the cryptocurrency which, can be taken forward with government support.

Those not in favor see a ban on cryptocurrencies akin to banning any technological innovation that is not state-owned. Moreover, it will be a blow suffered roughly by 2 Crore Indian investors, in light of investments going above Rs. 10,000 Crore.  

Upon hearing the announcement, investors panicked and started selling their cryptocurrencies without any thoughts. Not realizing; that the bill is just a proposal, which would be discussed in the Parliament before being finalized, the final draft could manifest differently. 

 

Therefore, the investors should remain calm, wait for further unambiguousness before making a decision.

Bombay HC asks for Update

The Bombay HC on November 29th asked the central government for a brief on the bill and an update on further actions. Seeing that, the court is hearing a public interest litigation (PIL) concerning directions for the government to address the increasing threats of cryptocurrencies and trading platforms malpractices.

The petition has been scheduled for a further hearing on January 17th.  

Ergo the centre is not only set to ban private cryptocurrencies, but the RBI is also set to create its digital currency, and RBI Governor Shaktikanta Das has spoken in its favor.

Currently, cryptocurrency is a global issue. Many nations are in the process of trying to regulate it, and many have already banned it. Amidst those quandaries, India is among the few countries working to formulate laws to combat the crypto challenge. 

Thus, the cryptocurrency industry awaits the verdict with bated breath to find out whether the Crypto Bill will bring a regulation or a ban on the crypto trade in India.

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