Cryptocurrency Bill to be tabled in Winter Parliament session: Here’s what this means for Indians
Only days after Prime Minister Narendra Modi chaired the first-ever parliamentary panel discussing crypto finance, the central government has announced that a long-pending bill to deal with cryptocurrencies will be introduced in the upcoming Winter Parliament Session.
The meeting, which took place on November 16, included representatives from various crypto exchanges, industry bodies and stakeholders, all invited to address persistent concerns over the risks emerging from cryptocurrency trading in the country. Consensus appeared to emerge that, while crypto trading cannot be stopped, it needed to be regulated.
Crypto markets crash
Although the precise contours of the bill are yet to be revealed, it “seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
That wording was enough to cause immediate panic among investors, sending crypto markets into a tailspin. Major cryptocurrencies like Ethereum, Bitcoin and Tether fell by a minimum of 15 per cent as panic-stricken investors quickly sought to liquidate their positions. Other private cryptocurrencies like Cardano, Solana and XRP also took a beating.
India’s crypto markets have bloomed in a policy vacuum
Despite the Reserve Bank of India consistently raising concerns over the dangers of cryptocurrencies – primarily its use in facilitating money laundering and terror financing -, India has emerged as a blossoming crypto market, contributing billions of dollars in trading volume.
According to some estimates, for the June-July 2021 period, the volume of trading across three of the largest Indian crypto exchanges – WazirX, CoinDCX and ZebPay – was pegged at a staggering $3.1 billion (Rs 23,000 crore). However, the advent of the crypto wave in India has taken place in a policy vacuum.
If the latest Bill is passed in the upcoming Parliament session, that may be about to change. And for crypto investors, the portents aren’t good. Despite several central banks around the world growing more amenable to cryptocurrencies and the applications of their underlying blockchain technology, India’s tryst with the crypto domain has been on-again, off-again.
In 2018, a central government panel recommended the prohibition of all cryptocurrencies, proposing a prison term of up to 10 years, in the wake of a series of fraud cases following Prime Minister Narendra Modi’s decision to demonetise 80 per cent of the nation’s currency. At the time, the Reserve Bank of India argued that the currency had no material basis, also noting that the ban was needed to limit “ring-fencing” of the nation’s financial system.
The ban stirred panic among the many fledgling cryptocurrency trading platforms in India forcing many to shutter. However, a group of these exchanges and traders appealed against the proposal at the Supreme Court via a lawsuit, and in March 2020, the apex court ruled in their favour. This, however, has not deterred the RBI from continuing to issue warnings of significant systemic risks emerging from unregulated cryptocurrency markets.
Is a blanket ban on the way?
While the details of the Bill are yet to be disclosed, the use of the phrase “private cryptocurrencies” has led to some retaining optimism that the regulation will not amount to a complete ban.
In a 2019 report, the Ministry of Finance sought to differentiate between public and private cryptocurrencies. According to the MoF’s definition, private cryptocurrencies are those that provide unrestricted anonymity and non-traceability, disabling any third parties from determining the identities or addresses in a particular transaction.
These differ from public cryptocurrencies – of which Bitcoin, Ethereum and Ripple are classed as – that offer some degree of anonymity but not complete privacy. However, whether the Bill has adopted the MoF’s definition or not remains a matter of speculation at this juncture.
