Days after Reserve Bank of India governor Shaktikanta Das warned that cryptocurrency poses a serious threat to the country’s macroeconomic and financial stability, the government’s legislative agenda for the upcoming winter session of Parliament revealed that the government intends to ban “private cryptocurrencies” from circulation.
To be considered and ultimately passed, the government intends to present “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021” in the winter session of Parliament, which will begin on November 29th and last through December. With this bill, the Indian government seeks to “establish a facilitative framework for the formation of the official digital currency to be issued by the Reserve Bank of India.” The bill also wants to outlaw all private cryptocurrencies in India; however, it allows for specific exceptions to be made in order to “advance the underlying technology of cryptocurrency and its applications,” according to a notification posted on the Lok Sabha website.
There hasn’t been any clarification on the meaning of private crypto-currencies by the government yet. As defined by some, cryptocurrency tokens such as Bitcoin, Ethereum, and many other digital assets are built on public blockchain networks, which means that transactions done through the networks are traceable while yet maintaining a certain level of anonymity for users. Private cryptocurrencies, on the other hand, might refer to Monero, Dash, and other cryptocurrencies that, while built on public blockchains, obscure transaction information in order to provide users with greater anonymity. In essence, whereas Bitcoin provides anonymity, Monero provides privacy and, as a result, is referred to as a private token.
A blanket ban on cryptocurrency exchanges in India would compel them to close their doors. When China declared a blanket ban on cryptocurrency in September, one of the world’s major cryptocurrency exchanges, Huobi, was forced to follow suit. On November 8, the exchange’s creator informed the Financial Times that the exchange’s profits from Chinese users will be nil over the three-month period from September to December.
‘There are two opposing groups inside the government: one that wants to outlaw cryptos and another that wants to regulate them.’ However, because the regulatory environment remained unclear, the first group is emerging as the victor,” according to a policy expert who is acquainted with the proceedings. A money bill, if passed by the government, will be cleared in 14 days and will be paid for by the federal government. “Alternatively, they could pass an ordinance, which would be more expedient,” the expert explained.
“The crypto regulatory bill has been scheduled for the winter session,” said Nischal Shetty, the CEO of WazirX, India’s largest cryptocurrency trading platform, in a tweet. The description has remained mostly unchanged. On both sides, there will be a lot of conjecture. “The good news is that more individuals within the government are becoming aware of how cryptography operates.”
However, as many industry executives and experts pointed out the last time a ban of this nature was discussed, it is likely that prohibiting cryptocurrencies may be technologically unfeasible in the future. In addition, industry leaders stated that while governments can prohibit the use of the local currency to purchase crypto assets, there is nothing that can be done to prohibit the use of crypto wallets, which exist online and are not under the jurisdiction of banks or governments. Because people may readily move money between each other through bank accounts and transfer the equivalent cryptocurrency between each other using wallets, peer-to-peer networks are also difficult to regulate and enforce.
When the Parliamentary Standing Committee on Finance met last week to discuss cryptocurrency, the panel’s chairman Jayant Sinha told CNBC TV18 that it was critical to strike a balance between innovation and regulation. Sinha cited officials from cryptocurrency exchanges who were in attendance at the conference to claim that the different exchanges collectively had 15 million KYC-approved members with an investment value of $6 billion. According to a survey published in October by the research firm Chainalysis, India is the second most “crypto-adopted” country in the world.
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