India plans law that will prohibit all private cryptocurrencies with certain exceptions

10 months, 1 week ago - November 23, 2021
India plans law that will prohibit all private cryptocurrencies with certain exceptions
The government is set to introduce a bill to ban private cryptocurrencies and create a framework for an official digital currency to be issued by the Reserve Bank of India (RBI) during Parliament’s Winter Session starting November 29.

A Lok Sabha (lower house of India's bicameral Parliament) bulletin released on Tuesday said The Cryptocurrency & Regulation of Official Digital Currency Bill, 2021, will “allow for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”

Reserve Bank of India (RBI) said in July it was working towards its own digital currency and the Central Bank Digital Currency (CBDC).

“A CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies that have mushroomed over the last decade. Private virtual currencies sit at substantial odds to the historical concept of money,” RBI deputy governor T Rabi Sankar said.

India, which has seen keen interest among investors to invest in cryptocurrency and also many investors already making investments, continues to warn citizens against putting their money on cryptocurrencies citing high financial risks.

Prime Minister Narendra Modi chaired a meeting to discuss the future of cryptocurrencies earlier this month and also warned against cryptocurrency falling in the wrong hands. The Centre also said that it is planning new changes in the income tax laws in a bid to bring cryptocurrency gains under the tax radar and also to introduce them during the Union Budget next year.

The Reserve Bank of India has on several occasions highlighted that it feels cryptocurrencies like BitCoin, Ethereum and Dogecoin among many others pose a risk to financial stability and also questioned its claims of market value while asking investors to not get “lured” by the promises of returns on cryptocurrencies.

However, the Supreme Court nullified the RBI circular banning cryptocurrencies in 2020 and also set aside an RBI circular of April 6, 2018, prohibiting banks and entities regulated by it from providing services with connection to virtual currencies in March this year.

Both the government and the Reserve Bank of India (RBI) have raised concerns about cryptocurrencies in recent months.

The three-week long winter session is scheduled to be held from November 29 to December 23.

On Monday, the Parliamentary Standing Committee on Finance discussed the pros and cons of crypto-finance with various stakeholders, and several members were in favour of regulating cryptocurrency exchanges rather than an outright ban on the such currencies, according to sources.

At the meeting convened by the prime minister, it was strongly felt that attempts to mislead the youth through over-promising and non-transparent advertising of cryptocurrencies should be stopped, sources had said.

An inter-ministerial panel on cryptocurrency under the Chairmanship of Secretary (Economic Affairs) had recommended that all currencies except those issued by the state should be banned.

Earlier, RBI had said that unregulated growth of cryptocurrencies poses threat to the macroeconomic and financial stability of the country.

Last week, RBI Governor Shaktikanta Das reiterated his views against allowing cryptocurrencies saying they are a serious threat to any financial system since they are unregulated by central banks.

The central bank has also plans to introduce an official digital currency.

On March 4, 2020, Supreme Court set aside an RBI circular of April 6, 2018, prohibiting banks and entities regulated by it from providing services in relation to virtual currencies.

The Banking Laws (Amendment) Bill, 2021 will also be tabled "regarding privatisation of two Public Sector Banks".

The Farm Laws Repeal Bill, 2021 will also be tabled to repeal the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, the Farmers (Empowerment and Protection) Agreement of Price Assurance, Farm Services Act, 2020, and the Essential Commodities (Amendment) Act, 2020.

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