‘Crypto Ban’ Rumours Fly As Government Mulls Tighter Cryptocurrency Regulations
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 will be taken up for discussion in the Winter Session of Parliament which starts today, along with 25 other legislations. The government has not supplied any supplementary information as to what the bill might entail and what its scope would be.
Its synopsis in the official notification is reproduced here:
“To create a facilitative framework for 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.”
After China’s blanket ban on cryptocurrency in September, many eyes were on India on whether it would follow suit or take it as an opportunity to leverage the benefits of crypto post the digital cash being shunted by its neighbour.
The Parliamentary Standing Committee meeting on Finance which held consultations with various cryptocurrency stakeholders, concluded on 15th November that “cryptocurrency cannot be banned” and that regulation was the more feasible way forward. The meeting was held with cryptofinance industry experts and associations. Although it was agreed that regulations should be enacted, it was unclear who the regulator should be.
News agency ANI quoted a source saying: “There was a consensus that a regulatory mechanism should be put in place to regulate cryptocurrency. Industry associations and stakeholders were not clear as to who should be the regulator”.
Thread on crypto and India's move to ban privately held 'currencies'.— Monika Halan (@monikahalan) November 24, 2021
Speculations On Cryptocurrency’s Future In India
There are various speculations regarding the fate of cryptocurrency in India which had begun even before the announcement of ra formal regulation on digital cash.In Internet and Mobile Association of India vs. RBI , the Supreme Court ruled in June this year prohibiting the Reserve Bank of India (RBI) from imposing restriction to banking access for cryptocurrency users in the absence of a legislative framework.
The ambiguity over the word “private cryptocurrency” has fueled much of this speculation. Some media outlets remained optimistic that the ban will exempt mainstream cryptocurrencies like Bitcoin and Ethereum which are based on public blockchain networks, since the transactions using them are traceable while protecting user anonymity.
Therefore, only coins such as ZCash or Monero, or other coins based on the dark web, will be under the ambit of this ban since the Bill’s synopsis says that “certain exceptions to promote the underlying technology of cryptocurrency and its uses” can be made.
Other points of view hold that the government is targeting upcoming projects like Facebook’s Diem e-currency which is a direct challenger to the RBI’s e-Rupee and operates on a “private” basis in the sense that it vets its users through KYC (know your customer). Some say that the government may black out all coins to ensure the universal applicability of the Central Bank Digital Currency (CBDC).
Banning Vs. Regulation As Coin Values Tank
India is home to the largest number of cryptocurrency holders worldwide at 10 crore, although in terms of population it comes to 7%, whereas Vietnam is the country with the highest proportion of cryptocurrency holders at 40%. The market research firm Finders stated in a report that the top 5 countries by crypto adoption were in Asia, and India too, figured in the list.
Recently, Prime Minister Narendra Modi said in an address to a Sydney-based think tank that cryptocurrency has advantages but it can “ruin” the youth if it gets in the wrong hands.
Arguments favoring a ban over regulation hold that the largescale adoption of cryptocurrency in small towns (Tier II and III cities) is akin to gambling and must be stopped. It is highly susceptible to illegal uses like terrorism and drugs financing, and the RBI is also worried about its impacts on inflation and foreign exchange.
Those in favour of regulation over banning bring up the fact of huge losses that investors will face, since he government has been tight-lipped regarding this aspect of the new bill. Adter the announcement of this Bill and the resultant unclarity, the values of major crypto coins are falling, as seen below:
They also argue that outright banning will be impractical and will push the practice onto the dark web. They also point to its economic possibilities in generating income and jobs.