Blog by- Anuj Vishwakarma
Introduction-
On November 23, 2021, among the 26 bills notified by the government in its parliamentary bulletin listing the legislative business, the one that caught the most attention was 'The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. As per the official bulletin, the bill primarily seeks to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India. The bill also seeks to prohibit all the private cryptocurrencies in India but it will allow certain exceptions to promote the underlying technology and its uses. The bill was notified in the bulletin a few days after the Prime Minister, on November 18, 2021, addressed the risk of cryptocurrencies (Bitcoin) in India while delivering his keynote at the inaugural Sydney Dialogue. There also are speculations among the crypto stakeholders that the bill does not ban cryptocurrencies, rather it regulates them in order to curb corrupt practices.
Anticipations over the new bill-
However, a little detail is available about the bill, the stance of both the government as well as the Reserve Bank of India succeeds in displaying the possible aim of the bill. The government and the Reserve Bank of India both, over the years have consistently argued for banning the cryptocurrency in India. The RBI had virtually banned cryptocurrency in 2018, however, the same ban was removed through an order of the Supreme Court allowing the trading in cryptos. Similarly, the government on multiple occasions has tried to ban cryptocurrency in India. In 2019, an inter-ministerial panel, headed by the Economic Affairs Secretary Subhash Chandra Garg, was appointed by the government. The committee advocated for the banning of all cryptocurrencies. In the same year, a similar bill to the current one named “The ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019” was introduced in the Parliament, however, it could not pass the majority and got quashed. Looking at the stance the government and the RBI have acquired and the little but unambiguous note in the official bulletin, the implications are that, if passed, the bill is going to vouch for the creation of the RBI’s cryptocurrency (Central bank digital currency) and put a ban on the private digital currencies to a wide extent.
Will the banning be justified?-
Cryptocurrencies have acquired huge popularity in the past decade or so. More than half of the world trade in cryptos now. The stance of countries towards cryptocurrency and its regulation has varied from countries like El Salvador, which considers cryptocurrency as a legal tender, to countries like China, which imposes a hard ban on the same. India, appearing to be somewhere middle in this wide band, is still discussing the regulation of cryptocurrency in India.
When it comes to India, cryptocurrency has many potentials, however, it is not a safe road. However, the bill which tries to ban the private digital currencies in India, with certain exceptions, if stands out on its implications, may result in the infringement of Article 19(1) (g) (Right to practice any profession or to carry on any occupation, trade or business to all citizens subject to Art) of the Constitution. The Government and the RBI over the years have advocated for the potential harms of cryptocurrency in India such as the use of the same in terrorist activities, money laundering, and weakening of the current banking system of the country. However, a complete and unregulated ban is not a solution. Cryptocurrencies have appeared to be an important asset for many countries dealing in these private currencies. Transactions in cryptocurrencies are done through a blockchain which results in the saving of a big amount of transaction fee. It is hard to counterfeit cryptocurrency unlike the regular currency, which is a very exigent problem.
India being a country with most cryptocurrency investors is already exposed to the use of cryptos and the sudden ban on the same might lead to a huge financial loss to the people of India. The market fluctuations could also be seen when almost all the private digital currencies like Bitcoin and Ethereum saw a big fall post the news of the alleged banning of cryptocurrency got viral. In the current status, the sensible step that India can acquire is to place a regulatory mechanism while dealing with cryptocurrency. The RBI can act as a regulating body for both its digital currency and well as the private digital currencies or a new regulatory body needs to be appointed to regulate cryptocurrency in India. Government bodies like the Securities and Exchange Board of India (SEBI) can be useful while dealing with International transactions and mitigating security dangers.
Conclusion-
Cryptocurrencies are stateless assets and a complete ban on the same cannot be ensured by any government or regulating body. One way or the other, investors are going to find a way to use and invest the same, and in that situation, the risks might be bigger and more severe. Thus, a complete ban on cryptocurrency through a legislative bill is not an answer to the potential harms presented by these digital currencies and a proper regulation of the same is the need of the hour. The Winter Session of the Parliament starts on November 29, 2021, and the country awaits the future of the bill and, in consequence, the future of cryptocurrencies in India.
References-