The government will be introducing the ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, during the winter Parliament session starting 29 November for contemplation and passing. The objective of this bill is to form a productive framework for creating an official digital currency that is to be issued by the Reserve Bank of India (RBI). The bill would also aim to ban all private cryptocurrencies; nevertheless, it will allow specific exceptions to boost the underlying technology concerning cryptocurrency and its usage.
The government is yet to finalise the definition of private crypto-currencies. As per a few definitions, Ethereum, Bitcoin, and several other crypto tokens function based on public blockchain networks, as in, transactions initiated via these networks will be traceable. Thus, it renders a degree of confidentiality to users. Other private cryptocurrencies such as Monero and Dash, built based on public blockchains, blur the transaction-related information so that users’ privacy is ensured. Bitcoin provides anonymity, while Monero ensures privacy and, hence, is considered a private token.
With a blanket ban, there will be a compulsion to discontinue the crypto exchange operations within India. Within the government, there are two groups currently, one group that intends to prohibit cryptos; the other group that is keen on regulating the cryptos. However, as the regulatory picture is not very clear, the first group is coming on top. The government may either introduce a money bill that will be passed in 14 days. One more option, they could also opt to do an ordinance that will be faster.
Prohibition of cryptocurrencies might not be possible technically. According to industry experts, the government could end local currency used for purchasing crypto; nevertheless, virtually, there is no way to end crypto wallets since they exist online and do not come under the scope of banks and governments. Keeping an eye on peer-to-peer networks will also be challenging as people could conveniently transfer cash to each other via bank accounts and transfer crypto equivalents to each other via wallets.
Several exchanges, when put together, comprise 15 million KYC-approved users, worth an investment of $6 billion. As per a research firm’s October report, India stands in the second position globally concerning ‘crypto adoption’. The need of the hour is to balance regulation and innovation.
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Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.