The future of India’s cryptocurrency industry has been uncertain so far, with reports of a ban coming. The Official Cryptocurrency and Digital Money Management Bill, 2021, appears to be in the ordinary parliamentary session. Mint explains where things stand.
How do India regulate cryptocurrencies?
Surprisingly, no one seems to have seen a draft of the Bill. The Bill is expected to take forward what was set out in draft legislation first seen in 2019. The industry is concerned about the real limits set by the Bill on cryptocurrency trading in India. But finance minister Nirmala Sitharaman has said the government will take a “calibrated” approach, which some have encouraged. While the Center is unlikely to allow cryptocurrencies like bitcoin, ethereum etc to be used as a legal tender, most crypto users in India handle it. these funds as assets, which the industry hopes will not be diverted.
What does the crypto industry want?
The Indian cryptocurrency industry, which includes exchanges such as WazirX and CoinDCX, has called on the government to reconsider the ban. Platforms like WazirX have spent millions of dollars on crypto in India just over the last few months. So, to avoid loss of wealth, the industry has said it would be a better idea to tax them, rather than ban them. The Internet and Mobile Association of India (IAMAI) has also said that the creation of a Central Bank Digital Currency (CBDC), or digital rupee, is not “pre-empted” on banning crypto assets in the country.
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Can cryptocurrencies be banned altogether?
This is another side that baffles a lot. Experts say banning cryptocurrencies is inconvenient because they only exist on the internet, meaning the government cannot stop consumers from using them. Cryptocurrencies are held in digital wallets and the transfer from one user to another can be as easy as sharing pirated movies on a hammer drive.
How will prevention affect the industry?
By criminalizing crypto exchanges all crypto exchanges targeting Indian users will be illegal. It may drive crypto holders in India to underground markets, and they are likely to take their wealth offshore. The entire blockchain industry is also concerned that this could make it more difficult and costly to develop new blockchain-based products. Companies often build products on top of the ethereum or other blockchain, and fear that banning ethereum could mean the use of its underlying infrastructure is also illegal.
Could India launch its own cryptocurrency?
Yes, the Reserve Bank of India is considering CBDC, which will be a digital version of the rupee. Nevertheless, CBDCs are different from currencies like bitcoin and ethereum, in that they are controlled by a central authority. They use the basic blockchain infrastructure to bring some transparency and increase security in the country’s financial systems, but cryptocurrencies were built to take control away from central agencies and to create a monetary system which is highly autonomous.