In March 2020, after a two year ban on cryptocurrency trading, the Supreme Court lifted all restrictions. As we enter in 2021, the Government of India is mulling to bring in a law in parliament that aims to regulate and in harsher terms stifle the cryptocurrency market in India.
The Indian Parliament is set to consider a bill to be passed into law that would ban private cryptocurrencies. Since ruling party controls both houses of Parliament, the chances of the bill’s passage are considered good.
Officially called the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, seeks to prohibit all cryptocurrencies in India and provide a framework for creating an official digital currency to be issued by the Reserve Bank of India (RBI).
While the definition of private cryptocurrencies in the bill isn’t clear, many expect Bitcoin and other such assets to be declared illegal. Furthermore, the bill is likely to make mining, holding, selling, issuing, transferring, and using of cryptocurrency a punishable offence with a heavy fine or imprisonment or both.
While the bill is inherently against cryptocurrencies, it will allow certain exceptions to promote the underlying technology of cryptocurrency, namely blockchain and its applications. If passed in to Law, this would turn India as the only major Asian economy to ban private cryptocurrencies rather than regulating them like corporate stocks.
The Reserve Bank of India, the official banking and financial regulatory authority, via a circular issued on April 6, 2018, had banned entities from dealing in cryptocurrencies and / or any providing any related financial services. The central bank’s banking ban was however overruled by the Supreme Court in March 2020.
As reported by WazirX, the largest crypto exchange in India, trading value in February hit the billion-dollar mark in it 11 days, in comparison with 25-30 days in January. That indicates people still trading strong despite the proposition of this fearful legislation.
There was some negativity on the day the bill was posted on Parliament’s website. What followed it for next couple of days was sheer frantic selling. However, trading routines and prices returned to normal within days.
Furthermore, unconfirmed reports suggested that that the proposed cryptocurrency bill may allow holders of such assets to exit before its anticipated ban, but may put a heavy penalty on its conversion to a legal asset.
The form and manner of declaration and how existing holders of cryptocurrency should dispose it of will be prescribed either in the law or through the rules to be notified later.
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