Indian Govt. plans bill to ban private Crypto Currencies

  • World’s biggest cryptocurrency Bitcoin is hovering around $60,000
  • Govt. plan a bill on cryptocurrency in the upcoming Winter Session
  • The bill name —Cryptocurrency & Regulation of Official Digital Currency Bill 2021
  • RBI was working towards its own digital currency (CBDC).

A provision of the Cryptocurrency & Regulation of Official Digital Currency Bill, 2021, allows for certain exceptions to promote cryptocurrency technology and its uses.
The central government plans to introduce a Bill on cryptocurrency during the Winter Session of Parliament beginning November 29 to facilitate the creation of an official digital currency issued by the Reserve Bank of India (RBI).

As part of the bill, titled Cryptocurrency & Regulation of Official Digital Currency Bill 2021, a “facilitative framework” will be put in place to create a national digital currency. The RBI announced in July that it would develop its own digital currency and the Central Bank Digital Currency (CBDC).

Central banks issue CBDCs as legal tender in a digital format. In other words, it is identical to fiat money and, as such, is exchangeable one-to-one with fiat money. Despite its title as a digital currency or virtual currency, the CBDC is not comparable to the private virtual currencies mushroomed in recent years. T Rabi Sankar, RBI deputy governor, said that private virtual currencies are contrary to historical notions of money.

Although cryptocurrency has seen a rise in interest among investors and many have already invested, India warns citizens about the high financial risks linked to investing in cryptocurrencies.

Recently, Prime Minister Narendra Modi held a meeting to discuss the future of cryptocurrencies. The prime minister also warned that cryptocurrency should not fall into the wrong hands. As part of its plans, the Centre plans to change the income tax laws to bring cryptocurrency gains under tax supervision. This will take place during the Union Budget next year.

In the past few years, digital currencies have had a hot and cold relationship with India. The Supreme Court vacated the ban in March 2020 after it effectively banned crypto transactions in 2018. Recently, there has been a call for stricter rules on virtual coin transactions, as an unregulated environment could make household savings increasingly dependent on the asset class.

Once the bill is presented to the parliament next week, investors are concerned that the government will eventually ban crypto trading. This led to a sharper decline in the price of Bitcoin in the Indian rupee compared with the rest of the world. At 11.31 am in Mumbai, the cost of bitcoins fell 12.2% on one of the biggest crypto exchanges, Wazirx, while the global price fell 1.8%.

Bitcoin, the largest cryptocurrency in the world, has a price pegged at $60,000, and it has doubled in value since the start of this year, attracting hordes of investors from around the world.

It is impossible to obtain official data on Indian crypto investors, but industry estimates indicate 15 million to 20 million crypto holders, with crypto holdings totaling around 400 billion rupees ($5.39 billion).

Recently, an increasing number of Indians — many of whom have never invested in stocks or other asset classes — have started trading cryptocurrencies, prompting some to worry that they might lose their money. There are record amounts of cryptocurrency trading and users on local exchanges this year, and they also raised record capital from high-profile investors. This year’s cryptocurrency space unicorns are CoinDCX, backed by B Capital, and CoinSwitch Kuber, backed by a16z and Coinbase Ventures.

Disclaimer: This information is covered based on the latest research and development available. However, it may not fully reflect all current aspects of the subject matter.

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