Cryptocurrencies on Indian crypto exchanges fell yesterday after news broke that Parliament will see the introduction of the much-delayed cryptocurrency bill during its winter session which begins on November 29 and is expected to continue until December 23. .
The official bulletin said: The Digital Currency and Cryptocurrency Official Regulation Bill, 2021, India aims to create a framework for the official digital currency to be issued by the Reserve Bank of India.
So far it's fine. But it was the second part of the official announcement that really put the cat among the pigeons. He said: “The bill also seeks to ban all private cryptocurrencies in India. However, it allows certain exceptions to promote the underlying technology of the cryptocurrency and its uses. "
So what are private cryptocurrencies? Aren't they all private? So is India considering removing all cryptocurrencies from China, which banned them en masse earlier this year?
This naturally caused a flood of speculation, and is one of the reasons why cryptocurrencies took a hit last night.
Indians and cryptocurrencies: a mix
India's approach to crypto, like its many moves in the economy, has been confusing. There have been many mixed signals from them regarding their official stance on digital tokens, even as they have seen tremendous growth locally.
India has now reportedly become one of the largest cryptocurrency markets with over 2 million Indians reportedly dabbling in cryptocurrencies. No official data is available, but industry estimates put the total cryptocurrency holdings in India at around Rs 40.000 crore.
Additionally, there have been reports of typical night flight operators ripping off the system. And one of the reasons given was that "the entire cryptocurrency ecosystem is unregulated."
So the Indian government, historically known for its parental controls, has turned its attention to cryptocurrencies. The labyrinthine complexity was probably too much for that. And the report came out last year that the government was planning to ban all cryptocurrencies. It was even said that he would introduce a bill during this year's budget session (February-March) to retire cryptocurrencies.
As it happens, the bill was dropped and a committee was formed to further discuss the matter with stakeholders. Since then, the signal from the government has been that cryptocurrencies can co-exist with the Indian rupee, but will be regulated.
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Earlier this month, Prime Minister Narendra Modi chaired a meeting that discussed the way forward for cryptocurrencies and related issues.
The meeting took place after the RBI, the Finance Ministry and the Home Office carried out an elaborate exercise on the issue, as well as consulting with experts from across the country and around the world.
The meeting reportedly also concluded that cryptocurrency markets cannot be allowed to become conduits for money laundering and terrorist financing. "The government is aware that this is an evolving technology, so it will monitor closely and take proactive measures," sources quoted as saying after the meeting.
“There was also consensus that the actions taken by the government in the area of cryptocurrency and related issues will be progressive and forward-looking. The government will continue to proactively engage with them, experts, and other stakeholders,” they added.
The latter element has given hope that the authorities will come up with a creative framework for regulations to weed out criminals while providing the necessary headroom for cryptocurrency operations.
The draft of a previous bill
But yesterday's wording in Parliament's bulletin that talked about banning private cryptocurrencies caused quite a stir.
The content of the latest bill remains a mystery because it has never been made public. It is suggested that it could be the amended version of the “Cryptocurrency Prohibition and Regulation Draft Draft of the Digital Currency Official Bill, 2019”.
According to the bill, "the operation, possession, sale, issue, transfer, or use of cryptocurrencies is punishable by a fine or imprisonment of up to 10 years, or both."
The bill also defined cryptocurrency as "any piece of information, code, or token that has a digital representation of value and has utility in a commercial activity, or acts as a store of value or unit of account."
According to the bill, "a person must declare and dispose of any cryptocurrency in their possession, within 90 days of the entry into force of the law." But it allows the use of processes or technologies underlying any cryptocurrency for experimentation, research or teaching purposes.
The central government, in consultation with the RBI, can issue the digital rupee as legal tender. The RBI may also notify a digital currency recognized as legal tender in a foreign jurisdiction as a foreign currency, according to the draft.
However, yesterday's announcement indicates that only private cryptocurrencies will be banned, although no one is sure how they are officially defined.
It is widely believed that crypto tokens like Bitcoin, Ethereum may not be affected as they are based on public blockchain networks. Transactions made on these networks are traceable. Private cryptocurrency can refer to Monero and Dash, which hide information about transactions.
Either way, the enigmatic world of cryptocurrencies will remain baffled until the Indian government plays its card out in the open.
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