The Budget session of Parliament will consider a bill that prohibits all private cryptocurrencies and provides for an official digital currency to be issued by the Reserve Bank of India.
Cryptocurrencies are digital or virtual currencies in which encryption techniques are used to regulate the generation of their units and verify the transfer of funds, operating independently of a central bank.
The government will introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 that seeks to create a “facilitative framework” for creation of an official digital currency that will be issued by the Reserve Bank Of India.
The Bill will prohibit all private cryptocurrencies in India, but will allow for certain exceptions to promote the underlying technology of cryptocurrency, and its uses.
The Lok Sabha Bulletin read, “The bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
The government will also introduce The National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021 through which a new Development Financial Institution will be set up.
The DFI will act as a “provider, enabler and catalyst for infrastructure financing and as the principal financial institution and development bank for building and sustaining a supportive ecosystem across the life cycle of infrastructure projects.”
The Indian central bank had in 2018 effectively banned crypto transactions after a string of frauds in the months following Prime Minister Narendra Mod’s sudden decision to ban 80% of the nation’s currency. The Reserve Bank of India had asked all regulated entities, such as banks, to stop any dealings related to private cryptocurrencies as part of that order. This brought cryptocurrency trading in India to a halt.
Cryptocurrency exchanges responded with a lawsuit in the Supreme Court in September and won in March 2020.
The Supreme Court set aside the Reserve Bank of India’s 2018 circular. The bench, headed by Justice Rohinton F Nariman, quashed the central bank’s circular on grounds of disproportionality. The judgment, authored by Justice V Ramasubramanian, noted that the RBI has failed to show “at least some semblance of any damage suffered by its regulated entities’’ to back its decision to effectively bar cryptocurrencies in India.”
Since then, cyrptocurrency exchanges have been operating in a regulatory vacuum.
The bill may spark an end to the cryptocurrency industry in the country. The detailed text of the bill has not been released in the public domain so far.