On 29 January 2021, the Indian government proposed a new bill, in the E bill section under legislative business. The bill was named as “Crypto currency and Regulation of Official Digital Currency” bill. This created a facilitative framework for the creation of official digital currency which is to be issued by the Reserve bank of India. The bill primarily aims to outlaw all the private crypto currency in India but provides some provision to support and use the existing crypto currency technologies.
Crypto currencies are nothing but digital currencies which uses encryption techniques to regulate and generate units of currency. It also verifies the transfer of funds, operating independently of a central bank.
The absence of proper legislative framework in the case of cryptocurrencies questions their status in India. The validity of trading and dealing with them makes it difficult without a strong regulatory policy.
As per the agenda the bill will expel all the private crypto currencies in India, however it still allows some exceptions to promote the existing technology of crypto currency and its uses.
The new crypto bill extends the possibility of financial growth of digital currency in India with the support of RBI and the government. Also the new bill aims at banning of all the private cryptocurrencies. The discussion about the bill in the parliament session has already sent shivers to the cryptocurrency market.
Since ‘Private Cryptocurrencies’ are to be banned, it still remains unclear of what actually is a private cryptocurrency as the draft of the crypto bill has not been made available to the public.
The main put-up of the Garg committee covered the banning of private virtual currencies and introducing a new digital currency.
RBI has been issuing warning notices about the risk of using crypto currencies since 2013. RBI claims that it may cause destruction to the economic growth of the nation.
On February 28, 2019 the inter-ministerial committee released a report recommending preventives measures related to crypto currencies.
When today’s economy lines up collecting currencies like Bitcoin and Ethereum, there are uncertainties whether the crypto bill will render the use of currencies like Bitcoin and Ethereum in India.
Further, there still remains the confusion whether CCs will be treated as a ‘currency’ or a ‘stock’ or there will be an outright ban on dealing with them.
The strategy
A practical thought suggest that the RBI and the government would regulate the trading of Crypto currencies by coming up with proper and secure policies. The policy regulates and facilitates the dealing of crypto currency either as a currency or virtual money including the following inclusions:
- The usage of crypto currencies for trade and sales should be reported to ensure the identity of participants and the amount of transactions. This gradually prevents anonymous crypto currency flow.
- Giving the crypto currencies a value which may fluctuate time to time over a specific period which is also accepted by the RBI. This step helps to recognize the virtual money with definite value.
- The Master circular issued by the RBI which include, know the customer norms (KYC), Anti-Money Laundering (AML) standards, and combating Terrorism financing can be applied to transactions relating to CCs to control the potential risk identified by RBI in relation to them.
- Compulsory registration of the transaction details when a crypto exchange is carried out to self-regulate and comply with KYC/AML regulations and make quarterly disclosure of RBI collecting the information of all transactions in CCs.
- If the CCs were compared to stocks, Security and Exchange board may license, regulate, and supervise thee trading and services in relation with the CCs.
- An independent unit to be formed to check the trends and emerging technologies in the market in reference to the CCs and advice the RBI on a regular basis.
- Study about the crimes behind the CCs exchanges and maintain an effective enforcement mechanism to safeguard the customers.