Exclusive: India Proposes 10-Year Jail For Cryptocurrency Use, May Introduce Its Own Digital Currency
India has proposed a jail term of one to 10 years for those who mine, hold or sell cryptocurrencies, a move that will double down on restrictions already placed by the Reserve Bank of India on digital tokens like bitcoin.
The government will also propose the introduction of an official ‘Digital Rupee’ in consultation with the central board of the Reserve Bank of India, according to the draft Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, which was accessed by BloombergQuint.
The draft bill has been recommended by a panel headed by Economic Affairs Secretary Subhash Chandra Garg and comprises members from the central bank, Securities and Exchange Board of India, Central Board of Direct Taxes, investigative agencies, among others. The findings of the panel haven’t been made public yet.
The Bill proposes a penalty—which may be prescribed by the central government—along with a jail term of up to 10 years, for those who “mine, generate, hold, sell, transfer, dispose, issue or deal in cryptocurrencies directly or indirectly”. Offences such as these would be “cognisable and non-bailable”, according to the draft bill.
“If any conduct is punishable under any other law, this Act will be in addition to, and not in derogation of such law,” it said.
The court, according to the draft bill, shall decide the appropriate prison sentence and a fine for an offence by:
- Culpability of the accused.
- Actual and intended gain made and loss caused.
- Repetitive nature of offence.
- Harm caused to the system.
The penalty imposed on the accused, according to the bill, shall be either thrice the loss caused to the system or three-fold the gains made by him/her, whichever is higher. If the loss or gain can't be reasonably determined, the maximum fine that can be imposed may be notified by the government.
The draft bill also states that if a violation under the Act is done by a corporate body, the director, members of managing committee, chief executive officer, manager, among other executives, will be held liable. It also seeks to protect action taken by central government officers in “good faith” under the Act from legal proceedings.
A person holding cryptocurrency will have to declare and dispose it within 90 days from the date of commencement of the Act, as per the draft bill, in accordance with the prescription of central government.
The draft bill proposes to amend the Prevention of Money Laundering Act, 2002, to include under its purview transactions like mining, holding, generating, selling, transfer and disposal of cryptocurrency.
It seeks to have an appropriate regulator under the Act that will have representatives from Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority, RBI, SEBI, and any other regulator notified by the central government.
The central government may approve digital rupee to be a legal tender, in consultation with the RBI’s central board. The digital rupee would be governed by regulations that will be notified by the central bank under relevant provisions of RBI Act, 1934, the draft bill said.
The central bank had in April last year virtually banned cryptocurrencies like bitcoin and barred regulated entities from providing services to any individual or business dealing in digital currencies. That came after at least three warnings to the public to be cautious while dealing with cryptocurrencies.
The draft bill also grants power to the RBI to notify any official foreign digital currency to be recognised as a foreign currency in India. Such recognised currencies will be governed by regulations notified by the RBI under relevant provisions of the Foreign Exchange Management Act, 1999.
However, Agustín Carstens, general manager, Bank of International Settlements, had recently said costs associated with moving to a digital currency may not be worthwhile for central banks, if there’s no “social need”.
“If you compare what a central bank digital currency can give you and if you compare what you have today in a two-tier system, where the central banks provide an important infrastructure and on top of that you have applications provided by third parties, you can get a very competitive payment system,” Carstens had said in Mumbai in April.