India’s crypto community is debating with the government on how to view cryptocurrencies and blockchain technology before considering ways to regulate the industry since the government imposed an invalid blanket ban on banks serving crypto companies in April 2018.
In the last update, on 29. In January, the government revealed its intention to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 in the next session of the lower house of parliament (the Lok Sabha).
As mentioned in the Lok Sabha opinion, the bill will have a dual agenda. The first is to create an enabling environment for the Reserve Bank of India to issue an official digital currency, and the second is to ban all private cryptocurrencies in India, stating that this would allow certain exceptions to promote the blockchain that underpins cryptotechnology.
The announcement of the bill caused panic.
The budget was approved only two days later, at 1. February’s bill on parliament’s agenda caused waves of panic in the Indian crypto industry, as some speculated that the government would announce its intention to ban private cryptocurrencies during budget implementation.
This panic has even led to bitcoin (BTC) being 20% cheaper than the world market price, while the price is normally up to 10% higher. However, the public heaved a sigh of relief when the current Finance and Corporate Affairs Minister, Nirmala Sitharaman, said nothing about the issue during the budget announcement. This also led to a rise in the price of bitcoin in India after the budget was announced.
Nishal Shetty, CEO and founder of crypto-currency exchange WazirX, told Cointelegraph: The fact that this was not mentioned in the budget shows that the government is taking its time in making a decision. Shetty also spoke about how the government might address the bill, if at all, in the next session of Parliament:
If the bill is tabled, it is likely to be referred to the standing committee to hold discussions with the crypto industry in India before proceeding with regulation of the sector. Ultimately, this is a very important bill, both financially and technologically. I am sure the standing committee will begin discussions with cryptography stakeholders.
However, according to CNBC-TV18, the government could have used regulations to pass the bill instead of tabling it in parliament and letting it go through the normal stages of passing a bill through the chambers of parliament.
The path of the ordinance means that this law can be enacted with the approval of President Ram Nath Kovind even when parliament is not in session. The report also states that the order is enforceable within one month of its issuance. This has caused further unrest in the cryptocurrency industry, leading to fears of an impending ban if it goes into effect.
Recently, discussions on Twitter in India have been enriched by the hashtag #IndiaWantsCrypto. This hashtag has gained considerable traction in the Indian crypto community, as several investors and other crypto personalities have also started using the same hashtag. Following the announcement of the crypto currency law in India, WazirX launched an industry-wide initiative in the form of an eponymous email petition campaign, Indiawantscrypto.net. For example, citizens can write letters to their local MPs urging them to regulate cryptocurrencies.
Does India really need a CBDC?
The bill, which will be debated in Parliament, also announces that the RBI will work on how India can create an official digital currency supported by the RBI, similar to the fiat currency, the Indian rupee.
This is largely because major economies like China have already reached the experimental stage for their own digital currency, which has been dubbed the digital electronic payment currency and is essentially a digital version of the yuan. Niraj Khandelwal, co-founder of cryptocurrency exchange CoinDCX, told Cointelegraph:
We believe that every country will have its own independent digital currency in the coming years, and that the countries that will adopt the first will have significant advantages. If these are the main benefits of issuing CBOCs, India should not be left behind and should actively consider taking steps in the same direction.
While the RBI stressed that CBRK is a legal tender in the country, just like the Indian rupee, it also called it a digital liability for the central bank, clearly indicating a skeptical and cautious attitude of the House of Commons towards digital currencies in general. This is despite the fact that the Indian government and the RBI are actively exploring blockchain technology and researching the benefits and risks associated with cryptocurrencies and blockchain.
The Indian government is even working with the Election Commission on blockchain voting trials to allow voters to cast their votes outside their home province. Indian voters must now return to their constituencies to physically vote. There is no possibility to send votes by mail, as is possible in the United States and other countries. Thus, this development will certainly prove to be very useful as an example of the use of blockchain technology.
However, the need for a CBDC in India can now be questioned, especially since India already has a very successful cross-border online payment service called Unified Payment Interface, which allows users to use their smartphones to pay merchants instantly and transfer payments to other bank account holders.
This application was developed by the National Payments Corporation of India and is widely used in rural areas of the country. The success of UPI, on top of the success of the nascent state banking system and its growing non-performing assets, may just indicate that the Indian banking system has other fish to fry. On that occasion, Shetty said:
CBDC will be useful and solve different problems than existing cryptographic tools. India should definitely have its own CBDC as this is a great opportunity for INR to go global. India cannot remain on the sidelines while other countries experiment and take off.
In its brochure on payment and settlement systems, the RBI has also indicated that it will first examine whether there is a need for a digital version of fiat currency and, if so, how it can be made operational. Nevertheless, the broad impact of this technological innovation in a country of 1.3 billion people will make it an interesting space to follow its development.
What are private crypto-currencies?
A summary of the Lok Sabha agenda states that the bill aims to ban all private cryptocurrencies in India. The use of the word private is extremely vague and uninformed, as it clearly does not indicate the fate of cryptocurrencies such as BTC and Ether (ETH), which are open source digital currencies whose public nature allows anyone on the blockchain to verify transactions.
Shetty said the use of the term private cryptocurrency indicates that there is a thought process that by creating its own cryptocurrency, the RBI avoids the need for other cryptocurrencies. He believes that this is a misunderstanding which needs to be cleared up. Handelwal also stated: Since the Indian government has not specified what it means by private cryptocurrencies, we can only wait and see.
Regardless of what the government means by the term private cryptocurrencies, there is no denying the growing interest of the average Indian investor to diversify their portfolios by investing and trading in cryptocurrencies. The growth in volumes on the main cryptocurrency exchanges is proof of that.
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