“It's important that all democracies work together and ensure that cryptocurrency (bitcoin) doesn't end up in wrong hands,” Prime Minister Narendra Modi had said on 18 November while delivering the keynote at the inaugural Sydney Dialogue.
Taking his message further, the government will introduce the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 in the Winter Session of Parliament, which is slated to begin on 29 November.
So, what exactly does this proposed legislation mean for India and the future of cryptocurrency in the country?
The Cryptocurrency and Regulation of Official Digital Currency Bill 2021
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 "seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology and its uses".
The bill also seeks “to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India”.
The Lok Sabha bulletin did not provide any other details about the proposed legislation.
Need for the bill
The decision comes amid concerns that cryptocurrency is being used to lure investors with misleading claims and for funding activities. Additionally, cryptocurrency is not issued by any central bank and has no sovereign backing, making tracing and recording it difficult.
In fact, a recent report had suggested that India had more than 10 crore crypto owners while homegrown crypto exchange platforms have maintained that around two crore Indians have invested in cryptocurrencies.
The government had planned on banning all cryptocurrencies last year and was even planning to introduce a bill during this year’s Budget. However, the bill was scrapped.
Earlier this month, a meeting chaired by Prime Minister Narendra Modi had chaired a high-level meeting with officials from various ministries and RBI on the issue of cryptocurrency. It was decided then that cryptocurrency can't be stopped but must be regulated.
RBI governor Shantikanta Das has also flagged concerns about cryptocurrencies. During an event held in early November, Das had said, “Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint. The government is actively looking at the issue and will decide on it. But as the central banker, we have serious concerns about it, and we have flagged it many times.”
Crypto prices crash
Following the news, the crypto markets nosedived. As of this morning, all major cryptocurrencies saw a fall of around 15 percent or more, with Bitcoin down over 17 percent, Ethereum falling by close to 15 percent, and Tether down by almost 18 percent.
News18 reported that Cardano, Solana, XRP also witnessed a sharp decline in the last 24 hours. Solana dropped 2.18 percent to $215.86 while Cardano tanked 6.64 percent to $1.68. XRP fell 1.40 percent to $1.04.
Legal tender in other countries
On 9 June 2021, El Salvador became the first country to officially classify Bitcoin as a legal currency.
Salvadoran President Nayib Bukele said the move would make it easier for his countrymen abroad to send money home.
Terming it “history!”, Bukele had then tweeted, “The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress. 62 out of 84 votes!”
The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress.
62 out of 84 votes!
History! #Btc🇸🇻
— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
Panama is also considering following in El Salvador's shoes.
But, as of now, El Salvador is the only country to officially recognise cryptocurrency.
In many other countries, like the United States, Canada, trading in these virtual currencies is allowed.
Inputs from agencies
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