New Bill To Ban All Cryptocurrencies Except Official Digital Currency By RBI
Pedestrian and cyclists walk walk near the Reserve Bank of India (RBI) headquarter building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

New Bill To Ban All Cryptocurrencies Except Official Digital Currency By RBI

The Budget session of Parliament will consider a bill that prohibits all private cryptocurrencies and provides for an official digital currency to be issued by the Reserve Bank of India.

The schedule for the session shows that The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is slated for introduction, consideration and passing.

The purpose of the law has been described as

  • to create a facilitative framework for an official digital currency issued by the RBI

  • to “prohibit all private cryptocurrencies in India”

But, certain exceptions will be permitted “to promote the underlying technology of crytptocurrency and its uses,” the Lok Sabha Bulletin said..

The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.
Lok Sabha Bulletin

Also read: India Plans to Introduce Law to Ban Cryptocurrency Trading

Stop And Start

The Indian central bank had in 2018 effectively banned crypto transactions after a string of frauds in the months following Prime Minister Narendra Modi’s sudden decision to ban 80% of the nation’s currency. The Reserve Bank of India had asked all regulated entities, such as banks, to stop any dealings related to private cryptocurrencies as part of that order. This brought cryptocurrency trading in India to a halt.

Cryptocurrency exchanges responded with a lawsuit in the Supreme Court in September and won respite in March 2020.

The Supreme Court set aside the Reserve Bank of India’s 2018 circular. The bench, headed by Justice Rohinton F Nariman, quashed the central bank’s circular on grounds of disproportionality. The judgment, authored by Justice V Ramasubramanian, noted that the RBI has failed to show “at least some semblance of any damage suffered by its regulated entities’’ to back its decision to effectively bar crytocurrencies in India.”

Since then, cyrptocurrency exchanges have been operating in a regulatory vacuum.

The surge in the price of Bitcoin has brought back interest in cryptocurrency trading in India, BloombergQuint reported earlier this month. Top banks, who has stopped dealing with cryptocurrency exchanges after the RBI’s order, have restarted transactions, executives at top cryptocurrency exchanges said. This, together with the surge in value of cryptocurrencies, have drawn new users. However, reports of frauds have also risen, underscoring the risks that exist in an unregulated cryptocurrency ecosystem.

Also read: Bitcoin Rally Draws First-Time Buyers In India But Also Fraudsters

Global Debate Has Changed

Since 2018, when the RBI first effectively banned private cryptocurrencies, the global view on these units has changed.

Calls from large investment houses has given credence to the view that Bitcoin may be seen as an alternative to gold. JPMorgan Chase & Co. has said that “s crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term.”

Earlier this week, Bridgewater Associates founder Ray Dalio said Bitcoin is “one hell of an invention” and added that he is considering cryptocurrencies as investments for new funds offering clients protection against the debasement of fiat money.

In addition, payment networks such as Paypal, MasterCard and Visa have also moved to set up systems which accept payments via cryptocurrencies.

Simultaneously, global central banks have also been exploring the feasibility of central banks backed digital currencies. Earlier this week, the RBI reiterated that it is exploring whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it.

Also read: Central Banks Are Hastening The Move Towards Digital Currencies

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