The government has listed the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 for introduction during the winter session of the parliament, which will start on November 29. On the Lok Sabha agenda, the purpose of the bill remains unchanged from when it was earlier listed in February this year:
To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses. (emphasis ours)
The unchanged description has caused many crypto investors in India to panic, and prices of all major cryptocurrencies have plummeted after the agenda was circulated. Developments over the past few months, however, strongly indicate that the crypto bill will not seek to ban major cryptocurrencies.
What we know about India’s approach to crypto regulation
The internet is currently abuzz with speculation around the term ‘private cryptocurrencies’. We don’t know if it refers to privately-held cryptocurrencies, the use of crypto assets as currencies (i.e. payments), or just all cryptocurrencies that aren’t controlled by the RBI. The government’s statements and discussions with stakeholders, however, indicate that the bill is not likely to entail a blanket ban on cryptocurrencies:
- Permitted as an asset, not a currency: India’s crypto law will regulate cryptocurrencies as assets but their use as currencies for payments might be barred, sources told the Economic Times on November 17. “The government is finalising legislation that will pave the way for regulation of crypto asset trading while barring the use of virtual currencies for payments and transactions,” the ET report said.
- Optimistic Meeting with Prime Minister: In a meeting with the Prime Minister earlier this month, sources said that “there was a consensus that steps taken in this field by the government will be progressive and forward looking,” NDTV reported. After the meeting, crypto exchanges also agreed to curb crypto advertising due to concerns regarding investors being misled.
- PM calls for international cooperation: In a tweet on November 18, Prime Minister Narendra Modi said that ‘democratic nations’ need to work together to ensure cryptocurrency and Bitcoin doesn’t end up in the wrong hands. The emphasis on democratic nations could also suggest a detraction from China’s approach which involved a blanket ban on crypto trading.
Take crypto-currency or bitcoin for example.
It is important that all democratic nations work together on this and ensure it does not end up in wrong hands, which can spoil our youth: PM @narendramodi
— PMO India (@PMOIndia) November 18, 2021
- Govt finds ban unfeasible: Due to the large number of Indians invested in cryptocurrencies, the government finds a ban unfeasible, a government source told ET in a report on November 8. “A middle path that balances the concerns of all stakeholders is more likely,” the source was quoted as saying.
- A calibrated approach: In an interview with CNBC TV-18 in March this year, after the same description of the crypto bill tabled in February caused a similar panic, the Finance Minister Nirmala Sitharaman said that the government will take a ‘calibrated position’:
“Obviously, the RBI will take a call on what type of official crypto-currency will be planned and regulated. But also we want to make sure there is a window available for all kinds of experiments which will have to take place in the crypto world. Therefore, it is not like we are going to look inwards. There will be a very calibrated position taken”—Finance Minister Nirmala Sitharaman (emphasis ours)
We are discussing crypto regulation trends with our subscribers this week. Subscribe to MediaNama to attend this session.
Key stakeholders remain optimistic, ask investors not to panic
- Nischal Shetty, WazirX: The WazirX founder and CEO took to Twitter with a plea, asking investors to have faith in lawmakers. ‘Ultimately, innovation will win,” he tweeted in an optimistic note.
All of us want regulation. We’ve been pushing for it from the last 1000+ days
Finally when regulation process has begun, why panic?
We need to have faith in our law makers. There’ll be discussions & deliberations
Ultimately, innovation will win ??#IndiaWantsCrypto
— Nischal (WazirX) ⚡️ (@NischalShetty) November 24, 2021
- Ashish Singhal, CoinSwitch Kuber: Coinswitch Kuber CEO Ashish Singhal also asked investors to remain calm, adding that “recent conversations with the government point towards a progressive approach.”
I'm aware of the frenzy caused by recent news around #Crypto. I urge you to remain calm &, like always, DYOR before arriving at a rushed conclusion. Recent conversations w/ the Govt point towards a progressive approach & there is no concrete statement made which claims otherwise.
— Ashish Singhal (CoinSwitch Kuber) (@ashish343) November 23, 2021
Crypto regulations in India: A timeline
Here’s a timeline of everything that’s happened till now around crypto regulation in India:
- April 2018: The Reserve Bank of India banned regulated entities including banks from providing services to crypto exchanges. It said that cryptocurrencies raise concerns of “consumer protection, market integrity, and money laundering, among others”.
- July 2019: A report by the Finance Ministry (drafted in 2017) advocated for a ban on the use of cryptocurrency in India. The report was drafted by an inter-ministerial committee chaired by the secretary of the Department of Economic Affairs Subhash Chandra Garg.
- March 2020: The RBI ban was then overturned by the Supreme Court of India which said that the move was “disproportionate”. It led to a surge in sign-ups across various crypto exchanges as they were able to access banking services.
- February 2021: The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 was listed in the official agenda of the Lok Sabha for the budget session, seeking to ban all private cryptocurrencies and allow a framework for an RBI-backed digital currency. The bill, however, was not introduced in the budget session.
- July 2021: The RBI governor announced that the central bank is working towards a “phased implementation strategy” for the introduction of central bank-backed digital currency (CBDC), giving regulators necessary powers of oversight and monitoring which cryptocurrencies lack.
- November 2021: The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 has been listed in the official agenda for the winter session, with the same purpose of seeking to ban all private cryptocurrencies and allow a framework for an RBI-backed digital currency.
- Govt Finds Cryptocurrency Ban Unfeasible Due To Large Crypto Investments By Indians: Report
- Government Will Adopt Calibrated Approach Towards Crypto-Currencies: Finance Minister Nirmala Sitharaman
- RBI Governor Shaktikanta Das Does Not Believe The Hype Around Cryptocurrency In India
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