New Delhi: India will soon bring in a law proposing to ban private cryptocurrencies altogether, while allowing its basic technology to be used for other purposes. It will also enable the issuance of digital currency by the Reserve Bank of India (Reserve Bank).
The proposed ban could be the first time a large economy has been hit, causing widespread unrest among companies in space and investors buying cryptocurrency. There are also concerns about closing companies, large-scale job losses and wiping out investor wealth.
At a time when virtual currencies are gaining widespread acceptance with electric car manufacturer Tesla Investment With 1.5 billion in bitcoins, India has decided to go in the opposite direction.
ThePrint seeks to explain the issues involved, the impact of the proposed ban and the evolution of regulation.
Also read: How can the Reserve Bank’s ‘retail direct’ open the door to India’s own bitcoin-like digital currency?
Why the motivation for the ban
Cryptocurrencies are not issued by any central bank and thus have no sovereignty. Unlike the currency issued by the central bank, these private cryptocurrencies have no underlying intrinsic value.
The Ministry of Finance compared bitcoins to Ponzi schemes due to lack of basic assets. These currencies see serious price fluctuations, leading to fears that Indian investors will lose money by investing in bitcoins.
Current regulatory framework
At present, there is no regulator that regulates cryptocurrency – the Reserve Bank or the Securities and Exchange Board of India (SEBI).
Following the massive price hike in 2017, the Government of India set up a committee with representatives of the Reserve Bank and SEBI under the Secretary of State for Economic Affairs. In addition, it pointed out that in the Union Budget submitted in February 2018, the government did not consider “crypto-currencies to be a legal tender or currency.”
Following that, in April 2018, the Reserve Bank advised institutions regulated by banks, banks and other financial institutions not to facilitate any transactions related to virtual currencies.
Within it The report was finalized In February 2019, a panel under the Secretary of State for Economic Affairs proposed a complete ban on cryptocurrency in India. It proposed a framework for digital rupee issued by the Reserve Bank and a draft law to implement it.
However, the report went into recession for more than a year until the Supreme Court set aside the ban imposed by the Reserve Bank in March 2020.
Also read: Everything will be in blockchain soon
The status of the new bill
The government has finalized the Cryptocurrency and Official Digital Currency Bill, 2021, and plans to send it to the Cabinet for approval soon.
There is also the bill Listed to file In the current budget session of Parliament, it will be tabled after the approval of the Cabinet.
It is overseen by an authorized technical committee headed by the government’s chief scientific adviser and a committee of secretaries headed by the cabinet secretary.
Prohibition can lead to job loss, illegal trade and loss of wealth
Nishit Desai Associates lawyer Jaideep Reddy said the ban would cause authorities to lose oversight of the organization.
“Currently, all major transactions are made only through banking channels; they are transparent, open to audit, file taxes, and often assist law enforcement agencies. A ban will create an underground system,” he said.
Nisal Shetty, founder of WazirX, a bitcoin and cryptocurrency exchange and trading platform based in Vashi, Maharashtra, said that if cryptocurrency is banned, exchange sites and other start-ups will have to close and many people will lose their jobs.
“Cryptocurrency also has a whole ecosystem of online influencers and bloggers creating content – they will lose their jobs as well,” he said.
He added that seven to 10 million users in India have at least $ 1 billion worth of crypto assets. There were users who started investing in crypto assets during the lockout because they lost their jobs and sought ways to increase wealth. If cryptocurrencies are banned, the wealth of all these Indians will be destroyed, ”he said.
Ashish Singhal, chief executive of CoinSwitch, a Bangalore-based exchange collection platform where users can trade cryptocurrencies, said a ban would do more harm to the government.
“The underground market for cryptocurrencies will thrive in the absence of regulations. Without any credible exchanges, it would be easy for ordinary people to fall into the trap of pyramid schemes, ”he said.
Also read: Memes can move markets – proof of the rise of Doc Coin
How the industry fights against the proposed ban
In view of this impending ban, all exchanges and partners launched the #Indiawantsbitcoin.
“A Website It was launched by sending mail to the respective MPs and the Ministry of Finance to let ordinary people express their support towards crypto (indiawantsbitcoin.org). The idea of this movement is to bring to the attention of the MPs that crypto is an important industry and millions of Indians are a part of it. The movement aims to help parliamentarians make informed decisions when the bill is tabled, ”he said.
Within three days of the campaign going live, more than 2 lakh users had sent emails expressing their support. “We aim to get at least one million users to voice their support,” he said.
How the digital rupee works is different from Bitcoin
The Reserve Bank has not finalized the definition of the digital rupee, but the law is a step in the right direction to launch the digital currency at any time.
“Just like you can buy an item at a retail store by paying for a currency note or a digital wallet, you can pay using a central bank digital currency. Ajit Khurana, former CEO of Business Incubator, said.
He said that despite many efforts, so far no country has actually used digital currency.
Reddy pointed out that a central bank digital currency would be the direct responsibility of the Reserve Bank and that an interim financial institution (such as a bank or e-wallet) could hold an account with the Reserve Bank without the need.
“In that sense, it would be the electronic version of the paper coin,” he said.
Shetty said the digital rupee would create transaction solutions instantly as it would reduce the time taken to verify that the transaction was correct.
“Now it takes two-three days to clear the transactions because the banks and the cleaning houses are checking that the transaction is legal and compliant,” he said.
Shetty Digital rupee and other cryptocurrencies serve different purposes and the two can live together.
Also read: Energy Cusling is Bitcoin’s incredibly dirty business
Why the media is in crisis & how to fix it
India needs a free, fair, non-hypnotic and questionable newspaper as it faces many crises.
But the media is in its own crisis. There are brutal layoffs and pay cuts. The best of the magazine shrinks, leading to a crude prime-time display.
ThePrint has some of the best young reporters, writers and editors. Retaining this quality magazine requires people like you to be smart and thoughtful to pay for it. You can do it here whether you live in India or abroad.
Support our magazine