The Indian government has yet again raised concerns about the Cryptocurrency ecosystem in the country. The government is working on a new bill that plans to ban all private cryptocurrencies. However, the situation might not be as bleak as it seems. It was only last year when the RBI lifted the ban on banks from supporting crypto transactions, almost after a period of two years.
Now, the new Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is in the limelight as it could decide India’s future with the crypto ecosystem. The bill will be discussed during the Winter Session of the parliament from 29 November.
According to the govt announcement, the new bill plans “To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India.” It further stated, “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.”
Understanding two important aspects of the announcement
1. The first part of the announcement assures that the government is not standing in outright objection to the currency. Instead, RBI is looking to tap into the technology by issuing more standards and streamlining the application of blockchain.
If at all the government plans to regulate the cryptocurrencies via a central bank, it could defeat the purpose of a decentralized ledger. The RBI also has the option to implement the blockchain in streamlining its existing infrastructure.
2. The second part is what has gotten crypto investors all riled up. The announcement clearly says that the bill aims to prohibit all private cryptocurrencies in India.
What can investors expect
This loosely-worded statement can take numerous directions. One of the scenarios could be that the government will reject private cryptos as any kind of currency. However, the government has admittedly left some wiggle-room by adding that there could be some exceptions in order to promote the technology of cryptocurrencies.
Banning cryptos completely may still be an option but it would be hard for the government to implement the ban, owing to the virtual nature of the currencies. On the other hand, Cryptocurrency exchanges could face some heat from the government in terms of regulation.
Since the lifting of the ban on bank transactions related to crypto, numerous exchanges have aggressively promoted their brands on mainstream platforms such as TVs and popular websites. This has at least partially resulted in immense adoption of the products like Bitcoin and Ethereum.
According to the Chainalysis 2021 Geography of Cryptocurrency Report, India has registered a growth of around 641% which is only second to Vietnam in terms of crypto adoption. The report suggests that there has also been a substantial increase in cryptocurrency-related entrepreneurship and venture capital investment in the region.
The increasing participation in the crypto ecosystem is only going to make the govt’s work more tricky. The RBI is yet to set up targeted taxation rules in and around the cryptocurrencies as investments. The new bill is also expected to address that aspect.
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