After narrowly missing out on being tabled in the Budget Session of Parliament earlier this year, the cryptocurrency bill is reportedly ready for being taken up for debate during the upcoming Monsoon Session.
The government has talked about banning all cryptocurrencies in India but that has not stopped millions of Indians from trading in the digital asset.
But uncertainty over its fate continues to spook investors even as the government has said it will come up with its own digital currency.
What does the crypto bill propose?
Finance minister Nirmala Sitharaman has said that her team has done the spadework on the bill with the views of all stakeholders having been ascertained. The Cabinet note is ready and it just remains to be seen “when the Cabinet can take it up and consider it so that then we can move it”, she told The Hindu.
In a bulletin for the Budget Session prepared by the Lok Sabha Secretariat, the bill’s key purpose was described to be the “creation of the official digital currency to be issued by the Reserve Bank of India”. It was also stated that the bill “seeks to prohibit all private cryptocurrencies in India”, although it would permit “certain exceptions to promote the underlying technology of crytptocurrency and its uses”.
News agency Reuters had cited an unnamed government source to report during the Budget Session said that the bill would represent “one of the world’s strictest policies against cryptocurrencies (and) would criminalise possession, issuance, mining, trading and transferring crypto-assets”.
It said that in such an event, investors would be given a window to dispose of their crypto holdings following which penalties will be introduced.
But the same story noted that investors had read encouragement in the finance minister’s comments when she had said that the government was “looking at ways in which experiments can happen in the digital world and cryptocurrency”. “I can only give you this clue that we are not closing our minds,” she had told CNBC-TV18, adding that “there will be a very calibrated position taken”, on cryptocurrency.
What have been the flip-flops on crypto?
In its answer to a question in Parliament during the last Budget Session on whether there was a ban on “bitcoin trading in the country”, the Union finance ministry had cited a Reserve Bank of India (RBI) circular from April 2018 that had “advised all the entities regulated by it not to deal in” virtual currencies.
However, it had noted that the Supreme Court had in a 2020 judgment set aside the RBI circular. That has meant that Indian investors have been able to trade in cryptocurrency.
But despite the apex court order, several private and public banks had reportedly kept discouraging their customers from dealing in cryptocurrencies, citing the original RBI circular. That led the Central bank to last month clarify that banks cannot cite that circular to deny services for cryptocurrency-related transactions.
“In view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from,” RBI said.
What’s the size of the cryptocurrency market in India?
According to blockchain data company Chainalysis, total investments in cryptocurrencies in India zoomed from $923 million in April 2020 to nearly $6.6 billion in May 2021, an over 600 percent jump.
The same company had said earlier in June that India stood at 18th among countries for total gains made from Bitcoin in 2020 with investors having earned a total of $241 million from their trades in the biggest and the most popular of cryptocurrencies.
Although clear figures are not available, close to 1.5 crore Indians are said to have invested in cryptocurrencies.
Can cryptocurrency be made legal tender in India?
El Salvador last month announced that it was making Bitcoin legal tender, the only country in the world to do so. The tiny Central American country of about 6.5 million people does not have a currency of its own and has been using the US dollar for domestic transactions since 2001.
However, experts have noted that it may not be realistic for India to emulate El Salvador’s example.
“Indian economy is an entirely different ball game” when it comes to doing something similar. Sumit Gupta, CEO and co-founder of CoinDCX told News18, adding that “while we would like the Central bank to add Bitcoin to their treasuries, I continue to maintain that India should view and regulate crypto as assets and not currency”.
But he did note that “crypto is a global phenomenon that is not going anywhere”.
With the Centre having said that it is exploring its own digital currency, Gupta pointed out that “countries that acknowledge the fact that crypto assets present a paradigm shift for the future of global finance and embrace it will definitely gain in the long term”.
RBI had last year said it was “very much in the game” to devise its own digital currency with reports suggesting that its focus was on the distributed ledger technology that is at the heart of cryptocurrencies like bitcoin.
A survey by the Bank for International Settlements has found that about 80 percent of the respondent Central banks had started projects involving some form of Central bank digital currency (CBDC).