The lower house of Indian parliament, the Lok Sabha, will introduce “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021,” according to a legislative agenda released by the government last week. The bill, which seeks to prohibit all private cryptocurrencies in the country, will be introduced during the budget session that began on Friday.
According to the agenda, the bill seeks to “prohibit all private cryptocurrencies in India,” but allows “for certain exceptions to promote the underlying technology of cryptocurrency and its uses.” It also seeks to “create a facilitative framework for the creation of the official digital currency” that will be issued by the nation’s central bank, the Reserve Bank of India (RBI).
Cryptocurrency regulation has proven to be a challenge for Indian policymakers. In April 2018, the RBI ordered financial institutions to break off all ties with individuals or businesses dealing in virtual currency within three months. This pushed the Indian cryptocurrency trading industry into a state of turmoil. The trade volumes plummeted and numerous exchanges shut down their business. The validity of the circular was challenged before the Supreme Court by crypto-trading entities. In its decision in Internet and Mobile Association of India v. Reserve Bank of India last March, the Supreme Court struck down the circular. However, the lack of a legal framework failed to provide an impetus to the virtual currency regime.
The government also constituted a committee on fintech-related issues, which submitted its report in 2019. Among its various recommendations, the committee recommended a ban on all forms of private cryptocurrencies. It also recommended fines and sentences of as much as 10 years for anyone dealing in them. It is understood that the current bill borrows heavily from the recommendations of that committee.
The bill will go a long way in deciding the future of cryptocurrency in India, which is stuck in limbo currently, being neither banned nor legal.