India’s crypto community has been on tenterhooks this week, eagerly awaiting a planned crypto bill to be introduced in the winter session of Parliament, which started on Monday. A proposed bill was added to the parliamentary agenda for the current session last week, which sparked off a panic selling of cryptocurrencies that saw Bitcoin and Ethereum prices tank by nearly 24%.
The bill’s objective is to lay the framework for a central bank digital currency (CBDC) while banning all private cryptocurrencies, according to the parliamentary agenda. However, the bill will allow for exceptions to promote the underlying technology of blockchain. The crypto bill has neither been shared with lawmakers nor the public.
Whatever the bill might entail, there’s been a palpable tension amid the crypto community in India that has affected not only those who own cryptocurrencies, but also those considering entering the space. On Monday, for instance, India Today reported that BuyUcoin has seen its new user registrations dip 20% week-over-week.
But this tension has hardly affected the optimism of exchanges for a positive regulation. Singapore-based crypto exchange Coinstore, for instance, announced its entry into India on Monday despite chances of a ban.
Here’s a recap of the major crypto developments of the week, both inside and outside the Parliament.
Finance minister Nirmala Sitharaman said in Parliament on Monday the government does not intend to accept Bitcoin as legal tender and does not collect information on Bitcoin transactions.
On the same day, minister of state for finance Pankaj Chaudhary said the ministry had received a proposal on the introduction of a central bank digital currency from the Reserve Bank of India in October. The proposal recommended an amendment to the 1934 Reserve Bank of India Act in order to expand the scope of the definition of ‘bank note’ to include digital currency, paving the way for the launch of a CBDC.
“RBI has been examining use cases and working out a phased implementation strategy for the introduction of CBDC with little or no disruption,” Chaudhary said. “Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk. Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option,” he added.
In a separate development on Monday, the High Court of Bombay asked the government to submit details about the introduction of the crypto bill and any further actions taken to regulate the crypto market on Jan. 17, 2022. The instructions came as part of a public interest litigation (PIL) case the court is examining. The PIL seeks that the central government formulate laws to regulate the crypto market since in the unregulated market, investors have no legal mechanism to address their grievances.
On Tuesday, Sitharaman said that cryptocurrencies are a “risky area” and that no decision has yet been taken about its advertisements. “Steps are taken to create awareness through RBI and SEBI (Securities and Exchange Board of India). The government will soon introduce a bill once the cabinet clears it,” she said. Sitharaman added that a regulatory framework for non-fungible tokens (NFTs) is also being explored.
In an interview with News18, however, former finance secretary Subhash Garg expressed skepticism over the bill being introduced in the current session of Parliament. Garg had drafted the 2019 crypto bill that called for a ban on cryptocurrencies and stipulated penalties including jail time for infractions. The new crypto bill is a modified version of the 2019 bill.
Garg said: “I am not so sure whether [the] crypto bill is expected any day. The bill has still not been formulated. It has not been considered by the cabinet and therefore, I have even doubts whether this bill will get introduced.”
Moreover, he said the objectives of the bill in the parliamentary agenda are “misleading.” Since private cryptocurrencies have not been defined and the bill is yet to be published, the description of the bill was “perhaps a mistake,” he said.
More importantly, he added that classifying cryptocurrencies as assets would be “another big mistake.” The government should examine the different types of cryptocurrencies and their varied use-cases in order to design a comprehensive policy without limiting the vast potential of the crypto market, Garg said.
On Thursday, India’s crypto community heaved a sigh of relief as a Cabinet note reviewed by NDTV suggested the government is looking to regulate cryptocurrencies as assets rather than banning them. The note also indicates that SEBI will be put in charge of regulating cryptocurrencies, which are to be traded on existing exchanges.
Indian investors will be given a cut-off date to declare all crypto assets and bring them under the crypto exchange platforms, the NDTV report said. It added that exchange provision infractions will attract jail-time of up to one-and-a-half years and penalties in the range of US$665,000 to US$2.6 million (INR 5 to 20 crores).
While the cabinet note may bring respite from speculations of a ban, since several contradictory reports have been circulating in Indian media — some claiming a ban, while others claiming regulation — until the draft is released, the country awaits more definitive information.