Govt to regulate cryptocurrencies, but allow promotion of blockchain technology
The government is going to introduce a bill in Parliament to regulate cryptocurrencies. All private cryptocurrencies, such as Bitcoin and Ethereum, will be banned. The law will, however, allow exceptions to promote the underlying blockchain technology.
The Union government announced yesterday (November 23) that it is going to introduce a new financial regulation bill to regulate cryptocurrencies in the winter session of Parliament, which would begin next Monday (November 29).
The bill, named ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’, would effectively ban all but a few cryptocurrencies. It is meant to create a facilitative framework for an official digital currency to be issued by the Reserve Bank of India (RBI) and ban all private cryptocurrencies, such as Bitcoin and Ethereum.
The RBI is set to launch its central bank digital currency (CBDC) by December.
The law will, however, allow exceptions to promote the underlying blockchain technology, the parliament bulletin announcing the bill said, without providing further details.
The government was planning to ban all cryptocurrencies last year and was even planning to introduce a bill during this year’s budget session, but the bill was scrapped, and a committee was formed to discuss the matter further with the stakeholders.
The RBI, however, has voiced “serious concerns” about private cryptocurrencies all along. The current governor, Shaktikanta Das had recently stated that the central bank had major concerns around cryptocurrencies, which, over a period of time, have been conveyed to the government.
“In the case of cryptos getting the status of currency, the problem remains: Who will provide the guarantee?” an RBI official told India Today.
In July 2017, the then RBI governor Urijit Patel told a parliamentary panel that the central bank was keeping a close watch on transactions involving cryptocurrencies. On April 6, 2018, the central bank issued a circular prohibiting banks and entities regulated by it from providing services with virtual currencies. This circular, however, was set aside by the Supreme Court on March 4, 2021.
The soon-to-be-introduced bill, therefore, also circumvents the Supreme Court order.
The new rules are likely to discourage the marketing and advertising of cryptocurrencies to dull their allure for retail investors, said an industry source who was part of a parliamentary panel discussion held on Monday.
No official data on India is available but a recent industry report suggests that there are more than 10 crore crypto owners and 1.5-2 crore crypto investors, with total crypto holdings of around Rs 40,000 crore (€4.77 billion).
