Cryptocurrency entrepreneurs and industry leaders are hitting the panic button as the government prepares to outlaw trade in private e-money ahead of the potential launch of India’s official digital currency.
On Friday, the Centre announced that it will introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the ongoing budget session. It is aimed at paving the way for eventual introduction of digital money by the country’s central bank at a time when China is testing a version of its digital yuan.
Industry mavens, who welcome the government’s move, remain concerned with the provision seeking to prohibit all private cryptocurrencies, while allowing certain exceptions to promote the underlying technology.
“We believe these are two important and distinct subjects,” said Naveen Surya, chairman emeritus at Payments Council of India. While bringing in a central bank digital currency could be a tool for expansion of the digital payment industry, “banning of private cryptocurrency is a separate subject…”, he said.
Regulation, Not Ban
The current bill, experts reckon, may resolve ambiguity on trade in digital money, which is currently neither banned nor legalised in India. The Reserve Bank of India (RBI) barred regulated entities such as banks from allowing trade on crypto exchanges in 2018. However, the Supreme Court overturned this move in March 2020, removing restrictions on cryptocurrency trade through banking channels.
“It deems a look by a separate committee and should be reviewed in detail,” Surya said. The cryptocurrency industry has long been seeking regulation of the digital asset, arguing against a ban.
Price Drops
Exchange founders said there was panic within the Indian cryptocurrency investor community following news of the bill. “The Indian crypto industry is in a panic right now, based on the price movements I see on exchanges,” said Sathvik Vishwanath, chief executive of cryptocurrency exchange Unocoin.
The price of bitcoin dropped on Indian exchanges on Sunday afternoon in comparison to global counterparts. On CoindDCX, the price of one bitcoin in a 24-hour period had seen a fall of 8%, at Rs 23,96,030. On global exchange Binance, the price of a bitcoin had fallen 1.88% in the same period to $33,639, or Rs 24,52,513.
“The news that the government will consider a bill is not new. However, this is not something that can be taken lightly. Efforts have been taken to keep the relevant parties informed,” Vishwanath said.
Cryptocurrencies, especially bitcoins, have seen a meteoric rise in the last few months, prompting more Indian investors to purchase the asset. Bitcoin prices rose close to 15% globally in a matter of minutes on Friday after Elon Musk, chief executive officer of Tesla Inc. and SpaceX, added #bitcoin to his Twitter bio.
In a tweet on Saturday, Congress politician Milind Deora said, “India must develop its own digital currency. China is already testing a digital yuan to accelerate the replacement of cash. Not sure why we’re banning other cryptocurrencies though. Blockchain technology is the future. RBI must embrace not fear it.”
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