Cryptocurrency ban part of govt's Parliament agenda; key points to know

The government has proposed to introduce a cryptocurrency bill in the upcoming winter session of Parliament, that starts on November 29 in order to facilitate the creation of an official digital currency by the Reserve Bank of India (RBI). 

Among 26 other pieces of legislation planned to be brought to Parliament in the session starting next week, The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, seeks to prohibit all private cryptos, except for a few, and bring in a mechanism to regulate cryptocurrency transactions in India. 

However, post the government's proposal, the values of major virtual currencies plunged substantially, with Bitcoin and Tether emerging as the top laggards.

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Key points about India's cryptocurrency bill: -

1. According to the bulletin issued by the Lok Sabha, The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, seeks "to create a facilitative framework for the 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."

2. The bill seeks to ban all private cryptocurrencies in India and is among 26 legislations the government plans to table in the Parliament in the winter session beginning next week, according to a Lok Sabha release on Tuesday.

3. This are some indications that the government is moving to ban digital currencies for transactions in the country.

4. However, the bill also allows for specific exceptions to promote the underlying technology of cryptocurrency and its uses.

5. Currently, India has no regulation for cryptos which are a set of decentralised virtual currencies such as Bitcoin and Ethereum that are not regulated by any autonomous banking regulator.

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6. Although no official data is available but industry estimates indicate there are 15 to 20 million cryptocurrency investors in India, with overall crypto holdings of approx. Rs 40,000 crore ($5.39 billion), Reuters reported. Meanwhile, as per a joint statement advertised recently by Indian crypto exchanges and industry bodies, crypto investments by Indians have surpassed Rs 6 lakh crore and the number of investors had grown swiftly to over 10 crore.

7. Prime Minister Narendra Modi chaired a meeting on November 13 to discuss the future of cryptocurrencies, in the wake of concerns that unregulated crypto markets may become money laundering and terror financing conduits.

8. The RBI is also likely to introduce an official form of digital currency and has time and again appeared indisposed towards accepting cryptos, expressing concerns over potential risks they pose to financial and macroeconomic stability as well as capital controls.

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9. The central bank, which has been voicing its concerns about cryptocurrencies since 2017, had issued a circular in April 2018, whereby it barred banks and entities regulated by it from providing services regarding virtual currencies. However, the Supreme Court (SC) set aside the circular on March 4, 2021.

10. As news of the proposed ban on cryptocurrencies got out, the value of major digital currencies such as Bitcoin, Ethereum and Tether fell by 18.53%, 18.29% and 15.58% on Tuesday. As per CoinDesk, most cryptos remained in the red on Wednesday as well.

11. Presently, El Salvador is the only country to have granted cryptocurrency the status of a legal tender.

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