India’s law to ban ‘private cryptocurrencies’ still unclear

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  • Narendra Modi
    Narendra Modi
    Prime Minister of India and former Chief minister of Gujarat

India’s Prime Minister Narendra Modi has confirmed the law on the regulation of cryptocurrencies will be presented to parliament on Monday.

The government is proposing to help the central bank create an official digital currency (CBDC), but the move will potentially come hand-in-hand with strict laws around cryptocurrency.

According to a description of the bill, the government is not going for ‘an outright ban’ but there will be regulatory mechanisms appointed in order to prevent the misuse of cryptocurrencies.

It may also say cryptocurrencies should not be recognised as legal tender, as that would be dangerous for the fiat currency and taxation system in India.

The bill, therefore, seeks to prohibit all private cryptocurrencies in India but would allow for certain exceptions to promote the underlying technology of cryptocurrency and its uses.

RBI suggests not to deal with crypto

In its answer to a question in Parliament during the last Budget session on whether there was a concrete ban on Bitcoin trading in India, the finance ministry had cited a Reserve Bank of India (RBI) circular from April 2018 that had “advised all the entities regulated by it not to deal in” virtual currencies.

However, it had noted that the Supreme Court had, in a 2020 judgment, set aside the RBI circular, meaning that Indian investors have been able to trade in cryptocurrency.

Several private and public banks allegedly kept discouraging their customers from dealing in cryptocurrencies, citing the exact RBI circular. This led India’s central bank to last month clarify that banks cannot cite that circular to deny services for cryptocurrency-related transactions.

“In view of the order of the Honourable Supreme Court, the circular is no longer valid from the date of the Supreme Court judgment, and therefore cannot be cited or quoted from,” the RBI said.

Nischal Shetty, the founder of India’s cryptocurrency platform WazirX urged people not to panic.

“All of us want regulation. We’ve been pushing for it from the last 1,000+ days,” he commented.

“We need to have faith in our lawmakers. There will be discussions and deliberations and ultimately, innovation will win.”

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