India plans to introduce a law to ban private cryptocurrencies such as Bitcoin in the country; aiming to provide a framework for the creation of an official digital currency during the current budget session of parliament. In the agenda published on the lower house website, the legislation seeks to “prohibit all private cryptocurrencies in India,” but allow “for certain exceptions to promote the underlying technology [blockchain] of cryptocurrency and its uses.” The law also seeks to “create a facilitative framework for creation of the official digital currency” that will be issued by the nation’s central bank, Reserve Bank of India, the agenda said.
A similar move in 2018
In 2018, an expert panel appointed by the Indian government recommended banning all private cryptocurrencies and proposed up to 10 years of jail time for offenders. The panel also suggested the government explore a digital version of the fiat currency and ways to implement it. It argued that Bitcoin and other cryptocurrencies are not currencies; they do not consist of metal or exist in physical form, nor have the stamp of the government. The RBI had, in April 2018, ordered financial institutions to break off all ties with individuals or businesses dealing in virtual currency such as Bitcoin within three months. This ban was, however, overturned by the Supreme Court in March 2020; as violative of the freedom of business and profession under Article 19(1)(g) of the Constitution. Since then, the cryptocurrency sector has operated in a legal vacuum in India.
The Bullish Run, Divided Opinion and the Blockchain Technology
Cryptocurrencies in general, and Bitcoin in particular, have been soaring to new heights with every passing day. Recently, the much-talked-about Bitcoin reached record high levels of $50,000, continuing its bullish run in the market. While there is a diversion in the opinion of users, experts, and many influential Business tycoons about the future and security of these cryptos, it is no denial that the rocketed surge in its prices has taken almost everyone by shock. Elon Musk‘s words in an interview, “I am a supporter of Bitcoin and it’s a good thing” gave a lot of credence. Interestingly, the minute Elon Musk gave this interview, Bitcoin prices rose up by $600. On the other hand, globally renowned investor Warren Buffet has repeatedly criticized Bitcoin and other cryptocurrencies as risky and worthless. “I can say almost with certainty that they will come to a bad ending,” the billionaire investor said.
Blockchain is a technological system, which has many uses, including maintaining records; in a manner that they cannot be easily tampered with. The system is applicable to any type of record like educational certificates; land, or as in the case of cryptocurrency, money. Governments globally have taken a positive view of Blockchain and a negative view of cryptocurrency. This also appears to be the view taken in the crypto bill to be tabled in Parliament. However, experts argue that the two cannot be separated. They say Blockchain is powered by cryptocurrency and cannot function effectively without the latter. “We’re proud that the RBI is exploring a digital rupee built on a Blockchain. Blockchain technology not only lowers costs, but it also improves accounting since it is an immutable ledger; giving the government new tools to fight corruption”, said Rahul Pagidipati, Chief Executive Officer at ZebPay.
Shocker to the Crypto Market
Resorting to its 2018 move, the Government has decided to ban all private cryptocurrencies and launch its own digital currency. The bill listed by the government, for introduction in the Parliament, seeks to prohibit all private cryptocurrencies and lay the groundwork for an official digital currency. As a result, the market was taken aback, taking a toll on their prices in the country, with bitcoin now trading at a 20% discount to global prices, against a 10% premium until a few days ago. Cryptocurrency professionals have argued that cryptocurrencies such as Bitcoin and Ether operate on public ledgers and hence cannot be called ‘private’ cryptocurrencies. The provisions of the bill in detail is not out to the public yet. Experts, however, believe that it would take some time for the country to bring any changes.
Should you sell your Cryptocurrency?
The proposed Bill created a chaotic situation in the market, leaving investors perplexed as to whether they should sell their crypto in order to avoid any loss of money. The detailed legislation will offer more clarity on whether you should sell your cryptocurrency. The bill, however, mentions that certain exceptions will preserve the underlying tech of cryptos (blockchain). However, there is not much need of creating a panic in the market since not all bills in Parliament pass in the same session. Following other precedents, the bill could go to a panel or deferred to a later session.
Governments around the world have been looking into ways to regulate cryptocurrencies but no major economy has taken the drastic step of placing a blanket ban on owning them, even though concern has been raised about the misuse of consumer data and its possible impact on the financial system.