The Indian Crypto community has engaged in discussions with the government about how it perceives cryptocurrencies and blockchain technology before finding ways to regulate the industry since the government imposed an outright ban on banks serving crypto companies in April 2018.
In the latest update, on January 29, the government revealed its plans to present the Digital Currency Act and Regulate the Official Digital Currency Act, 2021 to the House of Representatives of Parliament (The Lok Sabha) in the next session.
As mentioned in the Lok Sabha issue, the bill will have a two-pronged agenda. The first is “Creating an Facilitative Framework for Creating the Official Digital Currency to be Issued by the Reserve Bank of India” and the second is “Banning all private cryptocurrencies in India” while also noting that it will allow for some exceptions to strengthen the blockchain, the core technology behind cryptography.
The bill’s announcement caused a panic
Since the budget was to be announced just two days later, on February 1, the proposed bill on Parliament’s agenda sparked waves of panic across the Indian crypto industry, with some assuming that the government would announce its intention to ban “private cryptocurrencies” during the budget. .
This panic led to Bitcoin (BTC) trading at a 20% discount on global prices, while it is usually trading at a premium of 10%. However, the community breathed a sigh of relief when the current Finance and Corporate Affairs Minister, Nirmala Sitraman, did not mention anything about it during the budget announcement. This also caused the Bitcoin price to recover in India after the budget was announced.
“The fact that it is not mentioned in the budget shows that the government is in no hurry to make a decision,” Nischal Shetty, CEO and founder of WazirX cryptocurrency exchange, told Cointelegraph. Shetty also went on to say how the government could proceed with this bill if it were ever introduced at the next parliament session:
“If the bill is introduced, the bill will likely be referred to a standing committee so that they hold discussions with the crypto industry in India before moving forward with regulations for this sector. After all, this is a really important bill that includes both finance and technology. I trust That the Standing Committee will first have discussions with stakeholders in the field of coding. “
Although, as reported on CNBC-TV18, the government could go the “decree route” to pass this bill instead of presenting it to Parliament and letting it go through the usual stages of a bill that passes through both houses of Parliament.
The law track means that this law can be enforced with the approval of President Ram Nath Kovind even when Parliament is out of session. The report also stated that the decree could be implemented within a month of its issuance. This caused further uproar in the crypto industry, causing fear of an impending ban if imposed.
Recently, Twitter discussions in India were supplemented by the hashtag #IndiaWantsCrypto. This hashtag has gained a lot of traction within the Indian crypto community as many investors and other crypto personalities have started using the same hashtag. After the cryptocurrency bill was announced in India, WazirX started an industry-wide initiative in the form of a broad email campaign of the same name Indiawantscrypto.net. This would allow citizens to write to MPs in their constituencies urging them to regulate cryptocurrencies.
Does India Really Need CBD?
The bill to be debated in Parliament also announced that the RBI would work on a framework for how India would create an official RBI backed digital currency modeled after its fiat currency, the Indian Rupee.
This is mostly due to the fact that major economies, such as China, have already reached a pilot stage for their own digital currency, which has been called electronic payment of digital currency and is essentially a digital version of the yuan. Niraj Khandalwal, co-founder of cryptocurrency exchange CoinDCX, told Cointelegraph:
“In the coming years, we believe that every country will have its own independent digital currency, and that the countries that adopt the former will have great advantages. If there are significant advantages to issuing in the currencies of central banks, India also should not be left behind and think preemptively and take a step” In a similar direction. “
Although the Reserve Bank of India referred to the central bank’s digital currency as legal tender in the country similar to the Indian rupee, it has also described it as a liability in digital form of the central bank, which clearly indicates the skeptical and apprehensive nature of the House of Parliament towards digital currencies as a whole. This is despite the fact that the Indian government and the Reserve Bank of India are actively studying blockchain technology and exploring the benefits and risks associated with cryptocurrencies and blockchain.
In fact, the Indian government, along with the Election Commission, are working on blockchain assisted voting experiments to enable voters to cast votes from outside their home provinces. Currently, Indian voters have to return to their constituency to actually cast their vote. There is no option to mail sounds as is usual in the United States and other countries. Hence, this development is bound to be very beneficial as a use case for blockchain technology.
However, the need for a central bank digital currency in India currently can be questioned, especially since India already has a very successful online payment called Unified Payment Interface, which allows users to instantly pay sellers for services and transfer payments to other bank account holders via their smartphones.
This app is developed by National Payments Corporation in India and has widespread adoption reaching the rural areas of the country. UPI’s success combined with its emerging public banking system and their “ballooning inactive assets” could be an indication of the fact that the Indian banking system has a bigger fish to fry. Shetty said in this regard:
CBDC will be useful and solve different problems compared to what current crypto assets solve. India should definitely have its CBDC, as it is a great opportunity for INR to go global. India cannot sit on the sidelines while other countries experiment and take off. “
The Reserve Bank of India also stated in the Handbook of Payments and Settlements Systems that it would first “explore the possibility of a need for a digital copy of paper currency, if any, and then how to activate it.” However, given the broad nature of the impact of this technological innovation in a country of 1.3 billion people, this will be an interesting space to watch for further development.
What are private cryptocurrencies?
In the summary on Lok Sabha’s agenda, the bill states that it “seeks to ban all private cryptocurrencies in India.” The use of the word “private” is highly ambiguous and misleading, as it does not clearly indicate the fate of cryptocurrencies such as BTC and Ether (ETH), which are open source and public cryptocurrencies in nature, allowing any blockchain participant to verify transactions.
Shetty said the use of the phrase “private cryptocurrency” indicates that “there is a thought process that says RBI’s creation of its own cryptocurrencies eliminates the need for other digital currencies. In his opinion, it is a misunderstanding that needs clarification.” Khandelwal also stated: “Given that the government Hindi has not made clear what it means exactly. With “private cryptocurrencies”, the only option is to wait and watch.
Regardless of what the government means by the term “private cryptocurrencies”, it is undeniable that the level of interest of ordinary Indian investors in diversifying their portfolios by investing and trading in cryptocurrencies is on the rise. This is evidenced by the increase in trading volumes on the major cryptocurrency exchanges.