*Update (1:37 PM, February 9):
On Tuesday, Finance Minister Nirmala Sitharaman told Parliment that as per the government’s previous position, it does not consider crypto-currencies as legal tender and will take all measures to eliminate the use of these crypto-assets in financing illegal activities or as part of the payments system. However, at the same time the government will explore use of blockchain technology pro-actively going forward, she said according to Rajya Sabha Question No 79, February 9, 2021.
“High-Level Inter-Ministerial Committee (IMC) constituted under the Chairmanship of Secretary (Economic Affairs) to study the issues related to VCs and propose specific actions to be taken in this matter recommended in its report that all private cryptocurrencies, except any cryptocurrency issued by the State, be prohibited in India. The Government would take a decision on the recommendations of the IMC and the legislative proposal, if any, would be introduced in the Parliament following the due process,” Sitharman said in a Parliamentary submission.
Earlier: The government is finalising the contours of a new Bill to ban crypto-currency trading, mining and investments in the country, and will introduce the same in Parliament soon, said Anurag Thakur, the Minister of State for Finance in the Rajya Sabha on Tuesday.
According to the official Lok Sabha Bulletin Part II for the Budget Session of Parliament 2021, the government plans to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which will ban “private” crypto-currencies while at the same time providing the Reserve Bank of India (RBI) with the requisite legal powers to develop a central bank-backed digital currency (CBDC).
“Regulatory bodies like the Reserve Bank of India and the Securities and Exchange Board of India do not have a legal framework to directly regulate cyrpto-currencies, as they are neither currencies, nor assets or securities or commodities issued by an identifiable user. The existing laws are inadequate to deal with the subject. The government formed a inter-ministerial committee and the committee has given a report, post that there was a meeting of the empowered technology group which happened earlier as well as the committee of secretaries, chaired by the Cabinet Secretary, has also shared their report. The Bill is being finalised and would be sent to the Cabinet soon,” Thakur said.
Thakurs’ statement came in response to a question raised by fellow party member KC Ramamurthy, a Member of Parliament from Karnataka, on whether the government will bring a bill to curb crypto-currencies. Ramamurthy said that there is no doubt that the problem with Bitcoins and other crypto-currencies is escalating and the circular issued by the RBI had limited impact.
Thakur doesn’t address a question on the need to ban crypto-currencies
Congress MP Shaktisinh Gohli from Gujarat asked the State Finance Minister, why the government was bringing a bill to ban crypto-currencies in India, when the Supreme Court had set aside the RBI’s earlier circular and had called for regulations. Gohli asked if the government had filed a review petition against the court’s verdict in March last year.
Thakur did not specifically answer the MPs’ question, but said that the government would introduce the Bill soon in Parliament and thereafter, detailed discussions would follow.
“I think it’s a good thing to have more clarity on what stage the bill is at. It seems to be still at an initial stage. This is good as the Government will definitely invite the crypto industry to participate in discussions at a later stage,” said Nischal Shetty, chief executive officer and co-founder, WazirX.
While the government wants to promote the use of blockchain across various use-cases, it has decided to enter the global race of digital currencies or CBDCs while at the same time banning “private” crypto-currencies like Bitcoin and Ethereum among others. This is a similar approach to that of China, which banned trading and investments in crypto-currencies prior to developing its CBDC, which is still being tested.
The government’s decision to ban crypto-currencies in India comes a week after the RBI said it had begun exploring the possibility of issuing and developing a digital currency or digital Rupee. This is a reversal of the RBI’s position. Back in December 2019, RBI Governor Shaktikanta Das said that it was very early to speak on CBDCs. “Some discussions are going on. Technology has yet not fully evolved. It is still in very incipient stage of discussions and the RBI we have examined it internally,” Das said.
MediaNama has prepared a guide on crypto-currency regulations in India, listing the government’s position over the last few years and various policy recommendations. A complete low-down on crypto-currency regulation in India