The Indian Cryptocurrency Bill might be bad news for crypto investors.
Investors, cryptocurrency is not a legal tender in India. While you can still buy cryptocurrencies through crypto exchanges as there is no official regulatory framework, not having a confirmed set of regulations is barring crypto innovation. In April 2018, RBI banned banks and other financial institutions from supporting cryptocurrency transactions, as a result of the news that these digital coins were being used for fraudulent activities. However, in March 2020, the Supreme Court of India slashed down the ban on the grounds of being unconstitutional.
According to various reports, Indian citizens are holding around INR 10,000 Crore (US$1.5B) in cryptocurrencies. But as there is no clarity regarding the income tax issue for the gains made via crypto, the need for cryptocurrency regulations is now the new buzz. Or is it?
When the government was trying to put a complete ban on cryptocurrency, the Supreme Court of India suggested official regulations instead, in 2019. The court issued a statement that cryptocurrency can be accepted as a valid payment for legal transactions, and the payment system can be regulated by the RBI.
After giving much thought, the government has now decided to take firm actions. The Centre will soon form a new panel to analyze the possibility of regulating cryptocurrency in India, with the thought of revisiting old views. This new panel will allegedly consider using blockchain technology, new approaches to cryptocurrency as a digital asset instead of currency, and examine ways to operationalize the RBI’s proposal for its own digital rupee.
What is the Indian Cryptocurrency Bill?
‘Official Digital Currency Bill – 2021’ is the proposed crypto regulation that will suspend all private cryptocurrencies and work on laying the foundation for the launch of an “official digital currency” by RBI. This bill was introduced in the Parliament’s Union Budget session, this year.
Before the RBI launches its own digital currency, a 3-6 month exit period will be announced for investors to exchange their existing private crypto coins. However, a final draft of this bill is yet to be finalized.
RBI’s Official Cryptocurrency
India’s central bank, RBI, has given a statement that it is considering a DLT (Distributed Ledger Technology) in order to improve the market structure, as it will potentially roll out a legal central bank-regulated digital currency (CBDC) with the government’s support.
“A fiat currency cannot have the kind of volatility and fluctuations you will see in Bitcoin and other cryptocurrencies. We have an open mind. We are very open to a digital currency, the RBI is working on that”, stated the RBI official.
Not just India, The Bank for International Settlements (BIS) also conducted a survey recently among central banks across the globe to get their opinion about CBDC. Around 80% of the central banks said that they have already started to consider CBDC while assessing the benefits it will bring to the economy.