The Government of India seems to have resumed its efforts to ban cryptocurrencies after a lull in a political and legal battle.
The latest move by politicians came this week when they revealed a bill that could put any activity related to cryptocurrencies in checkmate.
If Cryptocurrencies Are Legal, a Law Can Make Them Illegal
The “Cryptocurrency and Regulation of Official Digital Currency Bill” seeks to ban private cryptocurrencies —possibly any token not issued by the state. Such a path could deal a severe blow to the country’s booming crypto industry.
It is important to note that several cryptocurrency exchanges and other crypto-related businesses had gained legitimacy after a court ruling declared that cryptocurrencies were legal. The court also ordered the country’s Central Bank to retract any measures affecting cryptocurrencies as long as they were not explicitly framed as criminal conduct.
A regulatory framework prohibiting the use of cryptocurrencies seems like the next logical step as it would overturn the court ruling . If this initiative succeeds, an entire industry would be illegal as soon as the law came into force.
And, this is apparently what Indian lawmakers are seeking. According to official sources, the purpose of the law is clear and without room for subjective interpretations:
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.
India Could Be Paving The Path For a CBDC
The issuance of an RBI-controlled CBDC is one of the possible exceptions to the rule. The Indian government has been exploring the idea of a digital Rupee for at least two years. However, it has always been cautious about talking about any kind of progress or the project’s current status.
In 2019 Governor Shaktikanta Das said that it was very early to speak of any formal progress on CBDCs. Such a cautious stance is key for India’s regulatory framework, since many of the crypto-related concepts are yet to be defined, and anything could change due to a technicism:
“Some discussions are going on. Technology has not yet fully evolved. It is still in very incipient stage of discussions and the RBI we have examined it internally,”
Considering that the parliament is controlled by a majority belonging to the Bhartiya Janata Party that aligns with Prime Minister Narendra Modi’s policies, the Bill has a chance of passing. However, the road to outlawing cryptocurrencies has been quite uphill for the Indian government over the years.
The Community Reacts
The news was not warmly welcomed within the cryptocurrency enthusiasts. Sumit Gupta, the co-founder of the COINDCX exchange, said that the government should clarify what it considers to be private and public cryptocurrencies, as Bitcoin tends to be considered a public cryptocurrency worldwide because it does not have a centralized entity to maintain and regulate it.
5/ RBI considering banning private cryptocurrencies is the second point.
Notable points are private and few exceptions.
While there is no official label of private cryptocurrencies recognized elsewhere, it is important what the bill will be classifying private as.
— Sumit Gupta (CoinDCX) (@smtgpt) January 30, 2021
For his part, lawyer Jaideep Reddy also developed a series of technicalities that should be studied, assuring that an express prohibition could generate a legal conflict (which could further extend the process of regulatory uncertainty surrounding cryptocurrencies).
4. An outright ban is likely to infringe the fundamental right to do business and the constitutional right to hold property. It is unclear from the draft Bill whether crypto-asset holders will be compensated by the State in any manner or how they are to dispose of their holdings.
— Jaideep Reddy (@jrtechlaw) January 30, 2021