Government Reviewing Key Parts Of Cryptocurrency Bill

The central government is reviewing key parts of a legislation that would have effectively banned cryptocurrencies in India. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was listed for introduction in the Budget Session of Parliament but was never introduced.

According to a person familiar with the matter, the government, together with regulators and other stakeholders, is taking a relook at key aspects of the bill. The person spoke on condition of anonymity.

Discussions are underway on three issues, the person cited earlier said. These include:

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.

The person said all recommendations are being reconsidered clause by clause, and discussions are underway with regulators and technical experts.

An email sent to the Finance Ministry on Tuesday seeking details of the status of the bill was not answered.

In 2017, the government had set up a committee led by the then Economic Affairs Secretary Subhash Chandra Garg to study the issues related to virtual currencies. The committee, in its final report made public in 2019, had recommended a complete ban on private cryptocurrencies. The same committee had also pitched for the introduction of an official digital currency issued by the Reserve Bank of India.

Since then much has changed.

A 2018 circular from the Reserve Bank of India barring regulated entities such as banks from dealing with cryptocurrency-related businesses and customers was struck down by the Supreme Court.

Besides, global interest in cryptocurrencies has been rising and networks such as Mastercard and Visa are working to accept select tokens via their networks.

Locally, too, trading in cryptocurrencies is believed to have surged, although data on the extent of such trades is not available.

The review of the planned legislation takes place against that backdrop.

The idea is to introduce amendments to the existing Bill itself considering the evolving situation, the person cited earlier said.

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 person said.

The government has also taken into account the central bank’s recent advisory on cryptocurrencies. While the RBI clarified that its 2018 circular is no longer valid, it asked banks to continue doing due-dilligence of cryptocurrency related businesses under “Know Your Customer” and “Anti Money Laundering” rules. In statements, thereafter, RBI Governor Shaktikanta Das said the central bank continues to have “major concerns” around cryptocurrencies.

Last week, the Enforcement Directorate also sent a show cause notice to WazirX, one of India’s largest cryptocurrency exchanges. In its notice, the ED, said cryptocurrencies are “money” for the purpose of India’s Foreign Exchange Management Act or FEMA. As such, all rules and requirements under FEMA will be applicable to these tokens.

After the Supreme Court judgment, in the current state it is pretty clear that people are allowed to trade in cryptocurrency. Once that is allowed, other laws such as money laundering also gets applied that resulted in the ED action on WazirX. Any Bill that would come and regulate the market, it is welcome for us. Nothing so far has indicated that there will be a complete ban on it from the government.

Vishal Gupta, Co-Founder, Bitcoin Alliance India