The Indian government is planning to outlaw cryptocurrencies and empower the central bank to develop a national virtual currency.
The new regulation comes in the wake of China's crackdown on cryptocurrencies, which saw banking authorities and the central bank declare all digital currency transactions unlawful.
A parliamentary bulletin announcing pending legislation featured a paragraph titled "The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021," which detailed the Indian plans.
However, the bill's attached explanation appeared to allow for the use of cryptocurrency. According to the document the goal was to establish a conducive framework for the formation of the official digital currency to be issued by the RBI (Reserve bank of India.
The measure also intends to outlaw all private cryptocurrencies in India, but it makes several exclusions to promote cryptocurrency's core technology and applications.
That's all that is available about the Bill publicly. However, media outlets have guessed what it might contain. While the administration may not be in favor of an outright ban, others speculate that the Reserve Bank of India is.
Hardly a few bitcoins may be legalized, according to several sources, and crypto gains may be heavily taxed. Another report claims that the government will criminalize all cryptocurrencies and implement a transition period for those who already possess them.
Cryptocurrency in India: How Big Is It?
It is one of the largest in the country and is continually increasing. According to a report released in October by Chainalysis, a crypto-analysis business, the Indian market expanded 641 percent from July 2020 to June 2021.
Southern and Central Asia as a whole was the 4th-largest crypto market assessed, with about $572.5 billion in value acquired during that period, accounting for 14% of the worldwide transaction value.
During that time, 42 percent of payments sent from India-based addresses were valued at more than $10 million, compared to 28 percent for Pakistan and 29 percent for Vietnam.
This indicated a more developed Indian market. At the very same time, India, which has a young and innovative population, was second only to Vietnam in terms of retail cryptocurrency adoption in the region.
Has Cryptocurrency Been Banned Before?
The Reserve Bank of India issued guidelines in 2018 highlighting the risks related to virtual assets, prohibiting banks and other financial institutions from trading in digital currencies or offering services to any company or individual dealing in digital currencies. In effect, this prohibited the use of cryptocurrencies in India.
The Supreme Court overturned the circular 2 years later based on symmetry. While the court acknowledged that the RBI has the authority to regulate digital currencies, such as cryptocurrencies, it also stated that the restriction must be reasonable to the danger of harm.
The Reserve Bank's broad ban should be overturned in this case, the court ruled, because the government had similarly been unable to pronounce on the legality of cryptocurrency.
What Is India’s Main Concern?
According to the Reserve Bank of India, it constitutes a severe threat to the country's economic and financial security. The rupee in India is only partly convertible, allowing the regulator to constantly monitor who has access to the country's marketplace.
By their very nature, cryptocurrencies are intended to be openly transferred and anonymously, prohibiting governments from both tracking and regulating transactions. Two topics that have been raised are tax avoidance and misappropriation of funds.
All of this is taking place without any form of regulation. This could have prompted the authorities since there have been concerns about bitcoin for some time.
The fact that cryptocurrency it's not under the supervision of central banks is one of the major issues raised in the Inter-Ministerial Committee on Virtual Currencies study released in February 2019.
It said that if non-official digital currencies are extensively utilized, central cross-border transactions have the potential to disrupt money flows and harm a nation's fiscal system.
According to the survey, incidences of bitcoin theft and hacking are prevalent. According to a study conducted by Ernst & Young, approximately $400 million of the total $3.7 billion generated in cryptocurrency offers to date has been stolen.
According to reports, Indian police were unable to identify Rs 9 crore in Bitcoin, the world's greatest cryptocurrency, that they had confiscated from a hacker in Bangalore in November.
Cryptocurrencies are likewise prone to price fluctuations. Bitcoin's price has always been erratic. Many people think that the market is a bubble as the value of Bitcoin rises (one Bitcoin is presently worth roughly Rs 40 lakh).
Cryptocurrencies Can Be Useful
Despite these reservations, there are advantages. Blockchain technology, according to the Inter-Ministerial Committee study, can be valuable for transferring funds, particularly modest cross-border payments, because it is time effective and cost-effective than other conventional means of payment, which sometimes include many middlemen.
Cryptocurrencies may also open the door to new ideas. For example, blockchain, which underpins most cryptocurrencies, could be used to store tax, insurance, and land registry, as well as effectively enforce agreements.
Written by - Nidhi Gupta
Edited by – Gunjan Nagpal
0 Comments