Indian finance minister Nirmala Sitharaman says proposed legislation on cryptocurrencies has been submitted to the country’s cabinet and is awaiting approval, according to a report by the Economic Times. The report quoted Sitharaman as saying: “Cabinet note is ready on cryptocurrency [bill]. I am awaiting [sic] cabinet to clear that.” 

According to the report, a high-level inter-ministerial committee formed in March to study cryptocurrencies has submitted a report recommending a ban on all private cryptocurrencies, but not a central bank digital currency. The report backs a 2019 report by another inter-ministerial committee formed in 2017 that recommended a blanket ban on crypto and published a draft bill that included penalties, including jail time, for violations. 

Mixed messages

The inter-ministerial committee’s conclusions stand in contrast to Sitharaman’s earlier assurances that India is not “shutting all options” on crypto, which themselves were at odds with the line taken by the country’s central bank, which has repeatedly asked for a ban on cryptos. 

In March, Reserve Bank of India Governor Shaktikanta Das said there were no differences of opinion between the central bank and the finance ministry. Last month, the RBI’s deputy governor said: “Private virtual currencies sit at substantial odds to the historical concept of money. They are not commodities or claims on commodities as they have no intrinsic value … They are not money (certainly not currency) as the word has come to be understood historically.”

India’s government has been indecisive as to whether to implement a complete ban or take a softer regulatory approach since last year. The crypto bill was first introduced in this year’s budget session of parliament, but was never read. If the cabinet note is cleared by November, the bill could be up for discussion in parliament’s winter session. 

If passed into law, the legislation could deal a fatal blow to India’s crypto industry, which has even caught the attention of Silicon Valley venture capital titans such as Mark Cuban and Tim Draper. Unocoin CEO and co-founder Sathvik Vishwanath told Forkast.News: “This definitely will be a very strong death blow, I think, for the entire industry.”

Vishwanath said that crypto investors, many of whom have invested a substantial part of their savings in crypto, stand to lose the most. According to industry estimates, there are approximately 15 million cryptocurrency investors in India and 350 start-ups in the crypto space. Late last month, the government admitted that it had no data on cryptocurrency transactions, numbers of exchanges or users, or taxes collected on crypto profits. 

Data deficit

Vishwanath described the government’s thinking as short-sighted since it was not a decision being taken based on solid data. The government’s primary concern has been to eradicate the use of crypto for payments and therefore to stop money laundering and other illicit activities using crypto. 

However, Vishwanath said that all technologies could be misused for illicit activities, and that curtailing tech was not the answer. He said: “Just because it can be used by bad actors does not mean it has to be curtailed in any way. So we have to figure out ways of keeping [malicious actors] away through regulation, but on the other side, increase technology through innovation.”

In a written statement, Nischal Shetty, CEO of crypto exchange WazirX, said: “We don’t know the final elements of the bill and what it entails for the crypto community and companies in India. Emerging technologies like blockchain and cryptocurrency, [artificial intelligence] and [machine learning] hold the key for future economic development. With our large, tech-savvy populace, we are ideally positioned to embrace, develop and pioneer the tech space.” 

CoinDCX, a crypto exchange that became a unicorn earlier this month, refused to comment for this article. 

Vishwanath said a blanket ban could lead to a “fierce” legal fight, pitting crypto businesses and investors against regulators, given that there are large companies in the space armed with much more data than previously available. 

But he said he was more worried about a “hibernation” period, or downtime, that businesses have to deal with while proceedings play out. 

“We may again get set back by another two years or one year,” he said, adding that such a development would be similar to the industry’s position in India after the RBI directed lenders to stop cryptocurrency dealings in 2018, a directive that was overturned by the Supreme Court early last year.