India: A Back & Forth Affair With Cryptocurrency

India has reportedly been set to ban all but a few private cryptocurrencies. What does it mean, and what could lie ahead?

Throughout the history of cryptocurrency, many countries have attempted to ban and limit access to coins and digital wallets. Some have had success for a small window of time, only to see it busted wide open when newer coins emerge and other countries join in. India has reportedly joined the list of people to go all out, as they are on track to ban all but a few private cryptocurrencies after the government announced on Tuesday it was introducing a new financial regulation bill. The back and forth affair with India and crypto continues.

A bill was recently presented, and sets to shake things up for many of big name coins in India. The ‘Cryptocurrency and Regulation of Official Digital Currency’ bill will create a facilitative framework for an official digital currency to be issued by the Reserve Bank of India, and that will look to ban all private cryptocurrencies, which includes Bitcoin and Ethereum.

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Let The Rain Fall Down…

Prime Minister Narendra Modi said earlier this month that “all democratic nations must work together to ensure cryptocurrency does not end up in wrong hands, which can spoil our youth.” It was his first public comments spoken directly on the subject. The law, which will be presented to the parliament in the next session, will allow exceptions to promote the underlying blockchain technology, according to the parliament bulletin. The statement was provided without further details, leaving many with more questions than answers. A pre-verification approach would create obstacles for thousands of peer-to-peer currencies that thrive on being outside the scope of regulatory scrutiny. Modi recently chaired a meeting to discuss the future of cryptocurrencies, amid concerns that unregulated crypto markets could become avenues for money laundering and terror financing, according to reports in recently weeks.

The new rules are also likely to discourage marketing and advertising of cryptocurrencies in order to dull their allure for retail investors, according to  an industry source who was part of a separate parliamentary panel discussion held on Monday.

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Status Check

The government could be looking to classify crypto as an asset class, as demanded by the crypto exchanges, rather than as a currency. A senior government official told Reuters that the plan is to ban private crypto-assets, ultimately while paving the way for a new Central Bank Digital Currency (CBDC).

The Reserve Bank of India, which has voiced “serious concerns” about private crypto, is set to launch its CBDC by December. Bitcoin, the world’s biggest cryptocurrency, is hovering around $60,000 (€53,000) and has more than doubled since the start of this year; this coin has the highest rank and is all over the world both for good and some bad. Many people have speculated billions in holding of crypto located in India and that has the government on high alert.

Will this be the start of countries ramping up regulation around crypto?


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India: Finance Minister Confirms Crypto Regulations are Incoming

India is getting closer to regulating cryptocurrencies on its own territory. The finance minister of India has presented an update on the country’s cryptocurrency bill, which the government has been working on.

Crypto Regulations to Finally Come In?

The Indian crypto bill was also included during the last budget session of parliament; however, it was unable to be considered because of time constraints caused by the pandemic. Now, In an interview with Businessline released last week, Finance Minister Nirmala Sitharaman provided an update on the country’s cryptocurrency bill.

“We have done a lot of work on it. We have taken stakeholders’ inputs. The Cabinet note is ready. We have to see when the Cabinet can take it up and consider it so that then we can move,” Sitharaman was quoted saying.


“From our side, I think one or two indications that I have given is that at least for fintech, experiment and pilot projects a window will be available. The Cabinet will have to take a decision.”

Ray of Hope

The next Parliamentary session begins on July 19, and the crypto community is hopeful that the impending cryptocurrency bill will be considered. The bill, according to its description on the parliament’s website, aims “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 private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”

However, the administration has published additional details regarding the law since then. In May, the finance minister stated, “there will be a very calibrated position taken … [The] world is moving fast with technology. We can’t pretend we don’t want it.”

Meanwhile, India is one of the most rapidly growing crypto investment markets in the world, with crypto investment increasing by more than 19,000 percent in just the last year alone. Indians invested more than $4 billion in cryptocurrencies, up from $200 million the previous year.

Aside from a huge increase in crypto investment, despite legislative uncertainties, the country is becoming a prominent choice for major crypto firms. Coinbase, one of the world’s largest cryptocurrency exchanges, recently stated that it would be growing its presence in India by recruiting a number of new employees.

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Indian Government Review Bill That Proposed Ban on Cryptocurrencies

It has been reported that the Indian government and top industry stakeholders are revisiting provisions of the law that advocated a ban on cryptocurrency. The bill in question is dubbed the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 that was developed years back but never introduced during parliament’s budget session.

Bloomberg Quint recently cited a source familiar with the matter as suggesting that the government is working closely with regulators and other stakeholders to re-examine key provisions of the bill.

Supposedly the government is focusing on three core subjects which are:

  • Whether to impose a complete ban on cryptocurrency trading in India.
  • Whether cryptocurrencies can be regulated by authorities, instead of a blanket prohibition.
  • What kinds of activities can be permitted and what should be discouraged.

According to the anonymous source, all recommendations are being re-examined clause by clause, and discussions with regulators and technical specialists are currently underway.

History of this Bill

In 2017, the Indian government established a committee chaired by then-Economic Affairs Secretary Subhash Chandra Garg to explore virtual currency issues. The group suggested a complete prohibition on private cryptocurrencies in its final report, which was made public in January 2019.

Additionally, the same group proposed the establishment of an official digital currency issued by the Reserve Bank of India. Fast forward to 2018, the Supreme Court knocked down a Reserve Bank of India circular prohibiting regulated institutions such as banks from dealing with cryptocurrency-related firms and clients.

Since then, cryptocurrencies have boomed in the nation with new businesses emerging and the cryptocurrency community expanding at a rapid pace. The proposed legislation is being reviewed against this backdrop.

The goal is to update the existing Bill in light of the emerging scenario, the source stated.

The process is time-consuming since the central government is combing through the bill clause-by-clause, and therefore the bill is unlikely to be introduced in the upcoming Monsoon Session of the Parliament, this source added.

Additionally, the government has also considered the central bank’s recent warning on cryptocurrency. While the RBI stated that its 2018 circular is no longer applicable, it urged banks to do due diligence on cryptocurrency-related firms in accordance with “Know Your Customer” and “Anti-Money Laundering” regulations.

Following that, RBI Governor Shaktikanta Das stated that the central bank continues to have “major concerns” about cryptocurrencies.

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Report: India Prepares Bill To Ban Cryptocurrency; HODLers to Be Given Transition Period

An anonymous Indian official has said the country’s parliament will soon impose a blanket ban on crypto trading, mining, and investments in the country and give hodlers three-to-six months to liquidate.

Yet Another Ban

According to sources, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021′ will be introduced by the parliament in the current legislative session.

It added that crypto investors would be given a three-to-six month transition period to liquidate their holdings after the new law comes into effect.

A senior Finance Ministry official commented saying that crypto wasn’t fiat currency backed by the Reserve Bank of India. The move will set the groundwork for the Indian government to issue a digital currency of its own and entirely ban cryptocurrency-related transactions via foreign exchanges.

The purpose of the bill stated that it also intends to prohibit all private cryptocurrencies in India. But, it will allow for certain exceptions to promote the underlying technology of cryptocurrency and its uses.

Future of Virtual Currencies

The government has also suggested launching the Reserve Bank of India (RBI) backed Central Bank-backed Digital Currency (CBDC). Now the industry and investors are uncertain about the future of virtual currencies in India. However, this isn’t the first time that the government has acted against crypto-currency.

The Indian government has been trying to establish ways to protect the investors and find a practical solution. Things changed dramatically in 2013 when the RBI had cautioned users of the risks of associated virtual currencies for the first time. It had said that the value of cryptos is a matter of speculation and not underpinned by an asset or good.

According to estimates, Almost 7 million Indians hold cryptocurrencies worth over $1 billion. India is the second biggest Bitcoin nation in Asia, after China, and the sixth biggest Bitcoin trader globally.

The government has stated that penalties have been proposed for exchanges, financial institutions, and traders who violate the new law after passing.

Government’s Impending Decision

Cryptocurrency trading platforms in India are anxious about the government’s forthcoming decision.

Unocoin chief executive officer Sathvik Vishwanath said that many people are waiting for details (of the proposed law) to emerge to determine their next action course. He added that if the government bans all cryptocurrencies, except the one backed by the state, it will be unsensible to continue their business in India.

Despite these developments in India, crypto-currencies have received a fresh boost following Elon Musk’s backing. His car firm, Tesla, bought about $1.5bn (£1.1bn) of Bitcoin. The investment helped Bitcoin to jump 17% to $44,220, a record high. Musk has also talked about Bitcoin and other cryptocurrencies, including Dogecoin, which jumped 50% after his endorsement.

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