There have been many issues regarding the ban of Cryptocurrency in India. The bill that is leaked defines, the word ‘cryptocurrency’ as any information or code or number or token not being part of any official digital currency, generated through cryptographic means or otherwise, providing a digital representation of value which is exchange with or without consideration, with the promise or representation of having inherent value in any business activity which may involve risk of loss or an expectation of profits or income, or functions as a store of value or a unit of account and includes its use in any financial transaction or investment, but not limited to, investment schemes.
It clearly separates cryptocurrency from digital rupee and foreign currencies. The law will punish any person indulging in the trading of cryptocurrency. As per the bill person includes “an individual, a Hindu Undivided Family, a company, a firm, an association of individuals whether incorporated or not, every artificial juridical person, any branch, office controlled by such person”
No one can use the cryptocurrency as the medium of exchange or a store of value or as a unit of account. Violation of the act may lead to 10-year imprisonment.
However, there is no restriction on the research of cryptocurrency or providing instructions to pupils regarding not to use cryptocurrency directly or indirectly.
There have been many rumors related to this, so the question arises: Has the government banned cryptocurrency officially?
Mr. Dharmapuri Srinivas, in Rajya Sabha recently, also asked this. He further questioned, “Whether the government has taken note about the prevalence of cryptocurrency in the country and if any action is being taken against the persons who are responsible for running the cryptocurrency in the market?”
Responding to this, minister of state for finance Anurag Thakur had said ‘No.’
He also added that further, in view of the risks and dangers associated with cryptocurrencies, government and RBI have been issuing advisories, press releases, and circulars to the public.
A few days back the Zebpay (leading cryptocurrency exchange in India) stated that rupee withdrawal could stop. The central bank, however, recently admitted that it issued the ban without doing enough research.
Crypto industry participants have engaged with the central bank to offer alternatives, some are asking for the deadline to be extended. The country’s Supreme Court said it will hear all petitions against the ban soon.
The inter-ministerial committee is set up to study all the aspects of cryptocurrency and providing a recommended crypto regulatory framework is headed by Secretary of Economic Affairs Mr. Subhash Chandra Garg who is also the country’s finance secretary. The committee also has representation from the Ministry of Electronics and Information Technology (Meity), the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Central Board of Direct Taxes (CBDT).
Before paying much attention to this bill, there are several important points to note.
First and foremost, this bill was not announced by the Indian government so its veracity is in dispute.
Advocate Mohammed Danish, the co-founder of Crypto Kanoon, an Indian platform for blockchain and crypto regulatory news and analysis, told news.Bitcoin.com:
“This document cannot be claimed as the final recommendation of the expert committee to the Ministry of Finance. The document contains no mark of authentication on it nor it has come out from any official source.”
However, in its reply to a Right to Information (RTI) request filed by Sethi, the RBI stated last month stated that it did not have any knowledge of this bill. In addition, the central bank also confirmed that they neither proposed a ban on crypto assets nor had knowledge of any other government departments doing so.
After sharing a copy of the bill, Sethi asserted Monday:
“This looks like a very rough draft of a proposed bill … it might be just a random discussion paper and it may not actually become a bill in the same manner and mode in which this has been stated.”
Nischal Shetty, CEO of local crypto exchange Wazirx, immediately tweeted in response to the leaked bill.
He advised everyone not to panic until a bill becomes law and stated that. “This crypto bill has not been introduced in the current Parliament session,” he emphasized. “This looks like a rough draft, plenty of changes to come.” Shetty has been running a Twitter campaign calling for the Indian government to introduce positive regulation for cryptocurrency.
He explained to news.Bitcoin.com that “The Monsoon session of Parliament will not be discussing this bill, which means now we need to see if it gets discussed in the next parliament session which might be in December,”
Furthermore, Sethi pointed out some mistakes in the bill which are as follows:
The bill includes a definition of cryptocurrency as “any information,” Sethi pointed out how this bill’s definition of crypto is “massively different from the interpretation” of other countries. As an example, he explained that if he encrypted a message to tell his friend that it is raining in Delhi and his friend decided to cancel his business trip based on this message, that piece of information would be considered cryptocurrency based on this bill’s definition.
Secondly, he also noticed that the bill allows cryptocurrency to be used for research purposes. He raised the question of what if all developers declare that their crypto projects are for research purposes. Moreover, if a college professor issues tokens for research purposes, Sethi questioned whether the professor would be allowed to sell the tokens and if anyone would be allowed to buy them.
The committee is very receptive and supportive of distributed ledger technologies and recommends its widespread use in delivering financial services. It also opens up the door for a possible official digital rupee. Private cryptocurrencies are of no real value rightly banned.
The government told the media that, “DLT-based systems can be used by banks and other financial firms for processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance, and reconciliation systems in the securities market.”
The committee has further proposed that as virtual currencies and its underlying technology are still evolving, the government may establish a standing committee to address the issues, if and when required.