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Will allow ‘experiments’ in cryptocurrency, says Finance Minister Nirmala Sitharaman

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India will not “shut off” all cryptocurrency, and will allow a window for “experiments”,  Finance Minister Nirmala Sitharaman said at a recent public event, vaguely indicating that the Indian government will allow some activity in the cryptocurrency. Speaking at India Today’s Conclave South 2021, Sitharaman said that the government has always been clear that it will not shut off all options, and will allow for cryptocurrency experiments in fintech. However, just a day after Sitharaman’s comments, Reuters reported on Monday that India will, in fact, ban the trading or holding of cryptocurrencies, quoting a senior government official.

The crypto-currency community in the country has been in a tizzy over the past month, ever since the government announced its intention to ban “private” crypto currencies. The government is expected to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which will ban “private” crypto-currencies while at the same time providing the RBI with the requisite legal powers to develop a central bank-backed digital currency (CBDC), according to an official Lok Sabha Bulletin Part II for the Budget Session 2021 of Parliament.

At India Todays’s conclave, Sitharaman was asked her take on the cryptocurrency debate, and whether it is inevitable for governments to realise that cryptocurrencies were here to say. This was her reply:

“Cabinet note is getting prepared. It is almost nearing completion and then it will taken to Cabinet of course. I have said my view on this, saying Supreme Court had commented on this cryptocurrency. Whilst we are very clear that the Reserve Bank may take a call on an official cryptocurrency or anything of that kind. But from our side we are very clear that we are not shutting all options off, we will allow a certain amount of window for people to use so that experiments in blockchain, bitcoin or whatever you may want to call it. The cryptocurrency experiments at fintech which depend on such experiments will have that window available for them, we are not going to shut it off all. But what kind of formulation, even for crypto, will have to be the content of the cabinet note which will be ready soon” — Nirmala Sitharaman, Finance Minister 

Later on, when asked about what she thinks of the uses of blockchain, Sitharaman reiterated that there was a lot of work going on in the field in India, and “we will certainly encourage that”.

Sitharaman’s statements at at the conclave are in line with the government’s tempered stance of late; earlier this month, she had said on CNBC TV-18 that the government is “not closing our minds”.She said that the government will take a “calibrated position” on the subject. Sitharaman’s deputy Anurag Thakur, Minister of State for Finance, has also said in the past that the government is keen to evaluate, explore and encourage new ideas with regard to blockchain and cryptocurrency.

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Sitharaman’s latest comments are being as a positive sign in the crypto community. Nischal Shetty, CEO of WazirX, said on Twitter that this meant the CBDC did not automatically mean shutting off crypto assets and utilities. However, the relief in the community was short-lived as Reuters reported the very next day that the government’s stance might not be so calibrated after all.

An unnamed senior official told the publication that the bill will give holders of cryptocurrencies up to six months to liquidate their holdings, after which penalties will be levied. At the same time, the government’s plan is to promote blockchain, the official reportedly said, saying that there is “no harm in harnessing the technology”. The official refused to say whether the bill will recommend jail times for offenders, or even fines, except for saying that discussions were in their final stages.

Naimish Sanghvi, who runs crypto-currency news website CoinCrunch, told Reuters that he’d stack up and run with the booming market rather than panic and sell. Sanghvi, however, later published a video on his YouTube channel arguing for some calm, noting the panic the report has created in the market. He told MediaNama that it was unfortunate the story was giving weight to information from an unnamed source, rather than the many public statements of the finance minister. He added that the report might “have managed to scare off a large chunk of the community in and outside India”.

Also read:

MediaNama has prepared a guide on crypto-currency regulations in India, listing the government’s position over the last few years and various policy recommendations; read it here: A complete low-down on crypto-currency regulation in India

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