The Crypto sphere and cryptocurrencies, in general, have seen a surge of interest recently, as India expected to share and deliberate on a bill for regulation of cryptocurrencies in its ongoing session of the parliament (the details of which are still unknown). Amidst the constant price fluctuations in the cryptocurrency market and its volatility, we identified the most googled questions around this sphere and have tried to share our perspective on these.
1. What is the ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’?
The ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ is a proposed statute for regulation of cryptocurrencies in India, its underlying technology as well as establishing a framework for the establishment of an official digital currency of India. The description of the Bill as published in the legislative business list in the Lok Sabha reads as – “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.”. The bill will be tabled during the upcoming Winter Session of Parliament, subject to the Cabinet’s approval.
2. Is cryptocurrency being banned in India?
The regulation of cryptocurrencies in India has witnessed a roller-coaster ride. As of now, there isn’t a ban on cryptocurrencies in India. In 2018, the RBI had announced a de-facto ban on cryptocurrencies in India by announcing that banks will not be able to transact in respect of cryptocurrencies. However, the Supreme Court in early March 2020 had nullified the RBI circular banning cryptocurrencies.
Since the contents of the ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ have not been released in the public domain yet, it is unclear whether there will be a ban on cryptocurrencies in India. The major confusion as regards the regulation or ban of cryptocurrencies in India is primarily owing to the interpretation of the phrase ‘prohibit all private cryptocurrencies in India’, and in turn, the interpretation of the term ‘private cryptocurrencies’ in India. Until there is clarity on the scope and interpretation of this term, the status quo will continue, and cryptocurrencies can continue to be traded in India.
3. Who are the stakeholders that are going to be affected by this bill?
While there remains ambiguity about the exact number of crypto investors in the country, it is estimated to be around 1.5-2 crores. If this number is true, it can be anticipated that a parallel financial economy is operating in India. While a ban on cryptocurrencies will heavily impact the individual crypto investors, a ban will also heavily impact private crypto platforms like WazirX, CoinDCX – some of them which have recently …….