New law to ban private cryptocurrencies

New law to ban private cryptocurrencies

The Cryptocurrency and Regulation of Official Digital Currency Bill that makes use of such currencies illegal and punishable is scheduled to be introduced in Parliament soon

India is contemplating to make new legislation to declare the use of Cryptocurrency as a mode of monetary transaction illegal and punishable. A bill to this effect is likely to be introduced in the Lok Sabha, the lower chamber of India's bicameral parliament, during the ongoing budget session.

"The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021" is part of the listed legislative business of Parliament, which commenced the budget session on 29 January after forced to curtail the monsoon session and combine the winter and budget sessions due to the outbreak of Covid-19 pandemic. The bill seeks to prohibit all private cryptocurrencies.

India's aversion for cryptocurrencies is well known. India had banned the use of cryptocurrencies in April 2018, with clear instruction to all financial institutions to shun ties with individuals and businesses dealing in the virtual currency within three months leading to upheaval in the market. The circular issued by the Reserve Bank of India (RBI) was subsequently challenged in the Supreme Court which struck down the RBI circular in March 2020. However, people are sceptical about using cryptocurrency since it continues to lack a legal framework.

The proposed bill, which would require to be adopted by both Houses of Parliament before it becomes a law of the land, is learnt to be broadly based on the recommendations of a committee the Government of India had constituted. The committee had submitted its report in 2019, recommending drastic steps like a blanket ban on private cryptocurrencies, fines and sentence for up to 10 years to anyone found dealing in it.

It is understood that the proposed bill may seek to create some kind of official digital currency that the RBI may issue once all existing confusions over the legality of cryptocurrency are removed. While banning private cryptocurrencies, the draft of the bill talks about promoting certain underlying technology and its uses of the cryptocurrency and create a facilitative framework for the creation of official digital currency.

With the Parliament witnessing heated exchanges of arguments leading to frequent adjournments over the three contentious farm laws, no date has so far been finalised about the introduction of The Cryptocurrency and Regulation of Official Digital Currency Bill. Once introduced, its passage may not witness any problem given the fact that India is yet to warm up to the private digital currency system and there might not be any opposition to the proposed legislation.