The vacuum in India’s regulatory climate with respect to the cryptocurrency industry has widened after the Supreme Court struck down RBI’s ban on the same. But the country’s plans to reportedly introduce a law to ban Bitcoin and other digital assets can have damaging consequences for the nascent crypto-ecosystem in the country.
What do we know about the Bill regarding India Cryptocurrency Ban so far?
- Yes Blockchain Technology
- Yes Digital Rupee
- No ‘Private’ Cryptocurrencies
The Regulation of Official Digital Currency Bill, 2021 is likely to be introduced in the Budget Session of Parliament in India. If passed, the bill would outlaw the use of private cryptocurrency as legal tender and currency.
The agenda by the lower court read,
“To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of crytptocurrency and its uses.”
But the big question:
Can India actually ban Bitcoin?
While the latest move by the government of the country has been criticized by several players in the industry, it is, however, expected to end the years of ambiguity on the use of cryptocurrencies which is neither banned nor legalized in India and begin a much-needed dialogue between the naysayers and the proponents.
Having said that, India’s cryptocurrency ban seems highly unlikely. Here’s Why:
For one thing, Bitcoin and other major cryptocurrencies are heralded as ‘public’ and decentralized in nature and not ‘private’. Bitcoin is Not privately-owned by anyone. Hence, it remains to be seen if it comes under the purview of the bill that seeks the ban.
Secondly, there are multiple avenues of regulating than resorting to a blanket ban, something that is been vehemently pitched by the players in the crypto space.
Thirdly, an outright ban is likely to infringe the fundamental right to do business and the constitutional right to hold property, as asserted by tech lawyer Jaideep Reddy.
There is a big question mark that needs to be assessed as to how the ruling government plans to compensate the crypto-asset holders and entrepreneurs who have significant capital invested in it. Enforcing a ban would mean shutting down institutions overseeing crores of rupees of assets, cutting down tens of thousands of jobs, pushing innovation to rival countries, and not to forget, provoking a black market for Bitcoin.
Let’s talk numbers. More than 7 million crypto holders are currently present in India with over $1 billion crypto assets holdings in total. How does the state plan on disposing of the wealth?
Globally, countries such as Algeria, Ecuador, Egypt, Nepal, and Pakistan have resorted to a complete ban on cryptocurrencies. Other countries, such as Saudi Arabia and Taiwan, have taken the route of a partial ban.
It has been a year since the Supreme Court overturned the ban on cryptocurrencies. But so far, very little has been done to achieve clarity. One of the biggest hindrances was the fact crypto exchanges and groups have failed to build a strong lobby for a pro-crypto bill because direct lobbying is illegal in India.
Countries such as the US, on the other hand, saw tremendous efforts of various cryptocurrency lobbying groups leading to a positive shift in sentiment among policymakers.
India Cryptocurrency Ban Vs Regulation
Several industry players have urged for a proper regulation instead of a blanket ban on cryptocurrencies. Jaideep Reddy has called the draft bill “overbearing and arguably unconstitutional.”
However, it is still not clear if it will be the same as the draft bill proposed by the committee said Reddy. He further asserted,
“The name of the Bill is different from the draft Bill since it excludes the word ‘banning’; so there is a chance the Bill may be less extreme than the draft Bill. But based on the short description we have, there is a good chance that it will try to ban at least some trading.”
Cryptocurrency has emerged as a disruptive and lucrative space. Its underlying tech- blockchain, is in itself the future of finance. Eliminating crypto would pose a serious threat to innovation in the country that has seen a historic contraction in the wake of COVID-19 pandemic, a recovery from which would take a long, long time.