The government surprised crypto aficionados earlier this week by unveiling a list of measures that would be introduced during Parliament’s winter session. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is on the list, and it intends to outlaw all private cryptocurrencies. Last year, the government proposed a similar bill, but it was placed on hold while industry experts and stakeholders were consulted. In addition, a committee was constituted to make more recommendations on the subject. All indications are that the government would not outright outlaw cryptocurrencies, but will instead seek to regulate them.
The new draught law, on the other hand, confirms that the position hasn’t completely altered. The inclusion of some exceptions to promote the underlying technology of cryptocurrencies, which is blockchain, is likely to be the only source of relief. However, the bill’s summary does not define private cryptocurrencies and does not provide any clarification on the specified exceptions. This has caused investors to worry, with many of them liquidating their crypto holdings in the last 48 hours.
According to the official document given by the government, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 will be submitted in the winter session of Parliament and will seek to outlaw all private cryptocurrencies with “a few exceptions.” At the start of this year, the Indian government took a firm position against cryptocurrencies, implying that it could impose a blanket ban. Since then, the finance minister has expressed his desire to regulate cryptocurrency and perhaps categorize it as a digital asset. The current law’s description, on the other hand, is quite similar to that of last year’s measure.
However, the investors must recognize that this is only a proposal. After it is introduced in Parliament, the measure will be debated, and the final draught may alter significantly. It wouldn’t surprise me if the current draught was completely discarded.
There’s also a lot of misunderstanding about what private cryptocurrencies are. They have yet to be classified by the authorities. Most cryptocurrency transactions can be traced or connected to wallet addresses, making them public cryptocurrencies, according to a simple technical definition. Then there are the cryptocurrencies that use blockchain technology to provide anonymous transactions. These coins conceal a user’s true wallet balance and address, and they may combine many transactions to avoid chain analysis. Private cryptocurrencies are what they’re called.
On the market, there are almost 11,000 cryptocurrencies right now. Private cryptocurrencies are currently classified ambiguously. The government does not create more than 99.9% of all cryptocurrencies; instead, developers, companies, and individuals do. As a result, these should all be private cryptocurrencies by definition. Cryptocurrencies such as Bitcoin, Ether, and others, on the other hand, are not owned by any team or corporation. As a result, they cannot be referred to as private cryptocurrencies. The developers and miners, on the other hand, have complete authority over any changes made to bitcoin or Ether. If we examine this factor, neither bitcoin nor Ether can be considered completely public cryptos “Mudrex’s CEO and Co-Founder, Edul Patel, explained.
The only snag is what happens if the government classifies cryptocurrencies based on who owns them. In such an event, all non-government-issued cryptocurrencies will be classified as private cryptocurrencies. This might lead to a ban on Bitcoin, Ethereum, and other cryptocurrencies.
“To the best of my understanding, Ethereum, Bitcoin, and other leading cryptocurrencies are not controlled or managed by private organizations, transactions are recorded on a public ledger, and they are accepted as legal tender in every major economy. However, MLM businesses and individual companies are currently marketing a huge number of cryptocurrencies in the country, and these coins have been the subject of a few large scams in the past. So, it’s a sensible option if the government decides to restrict such privately held cryptocurrencies “Hitesh Malviya, the founder of itsblockchain.com, noted.
However, the bill confirms that cryptocurrencies will almost certainly never become legal cash in India. The original goal of crypto was to create a viable alternative to existing fiat currencies. Crypto aficionados have long emphasized the open nature of the currency and believe that decentralized transactions are the way to go. El Salvador is one of the first countries to accept Bitcoin as legal money. However, Bitcoin or any other cryptocurrency will not be able to replace fiat currency in a country like India.
The Reserve Bank of India will undoubtedly issue its own digital money. Shaktikanta Das, the governor of the Reserve Bank of India, has also been dismissive of cryptocurrencies. Only a few weeks ago, he stated that cryptocurrencies pose a significant threat to any economy. In the past, the RBI has expressed interest in launching digital money. However, it has yet to give any information on it. However, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, suggests the possibility of an RBI-backed digital currency being implemented shortly.
The planned restriction on private cryptocurrencies is also intended to boost the value of the RBI-backed cryptocurrency. According to some analysts, the government may only allow crypto trade through government-approved platforms and exchanges. It’s possible that a new regulatory organization could be established, or that cryptocurrencies will be brought under the purview of the Reserve Bank of India (RBI).
Despite proposing the law, there have been various reports in the last 24 hours stating that the government may not ban cryptocurrencies and may instead seek to limit them. Investors should be patient at this moment, wait for further clarification on the law, and then decide what to do with their investments.
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