As per the developments that have come into prominence to date, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is not likely to be introduced in the presently operational parliament’s winter session.
Discussing the bill, India’s Finance Minister, Nirmala Sitharaman had earlier expressed that a well-consulted bill should be anticipated. Once the cabinet clears it, it will be tabled in the parliament.
Most recently, reports surfaced which expressed that Sh. Narendra Modi, India’s PM would finalize the regulatory framework for cryptocurrencies. This was even while the viewpoints of the stakeholders were conflicting in nature.
As per the reports, the bill would have been such that it would have proposed a jail term of 1.5 years or a penalty of INR 20 crores in the event its norms are violated. Nevertheless, it was simultaneously expected that the government would recognize cryptocurrency as an asset class while prohibiting its use as currency.
The development being discussed here, wherein the cryptocurrency bill will not be introduced in the parliament’s winter session is likely to accentuate the existing levels of tension and confusion concerning cryptocurrencies and their future in India.
This development needs to be paid a sufficient amount of heed to, in light of the fact that the number of cryptocurrency owners in India is more than those residing in any other country. India has over 10 million cryptocurrency owners.
A great many ground needs to be covered from the Indian perspective
Indian lawmakers today have the liberty to go for the best suited approach they feel would be right to deal with cryptocurrency-related matters. The choices before them are abundant, because across the world, a few of the policies for dealing with cryptocurrencies are such that there are few similarities among them. One such example is the UK and the European Union.
Let us consider the case of the UK. As per the regulatory framework for cryptocurrencies employed across the UK, all cryptocurrencies have been sub-divided into two well specified columns. They are regulated and unregulated.
The regulated bucket has all assets that are similar to conventional financial assets. They are governed by the same fiscal authority that governs the particular assets of that kind.
But the remainder of crypto assets comes under the unregulated bucket. This, nevertheless, does not render them illegal. Instead, it implies that the government or any other related authorities will not forward consumer protection to crypto users in these particular cases. So, the crypto industry ends up being similar to the wild, wild, west.
Nevertheless, when we consider EU, it has taken a different direction altogether. EU has come up with a published proposal that defines the regulations for crypto-assets. This is called the Markets in Crypto-Assets Regulation. As per this proposal, EU intends to comprehensively categorize the crypto assets of different types.
Herein, it is at least under one of the four categories proposed by the EU commission that the crypto assets will fall. Similarly, the usage, trade and issue of the cryptocurrencies will also be heavily regulated.
Let us now consider the approach adapted by Japan for the regulation of cryptocurrencies. Their approach bears more similarities to the approach adapted by the UK, rather than the approach adapted by EU.
In the Japanese laws, there is no unified regime that is applied to the crypto assets. Instead, the determination of the assets’ and tokens’ legal status is determined by their functional use case.
Just as an instance, utility tokens and cryptocurrencies such as ETH and BTC are regulated under the Payment Services Act as crypto assets. Businesses, herein, are involved with the trade, issue and management of these assets. But, these businesses need to register as a crypto exchange service provider.
Singapore makes a balanced legal and regulatory environment available for cryptocurrencies. Monetary Authority of Singapore (MAS), which is the financial regulatory body of Singapore, is continuing with encouraging experimentation in the blockchain arenas that are associated with the use of cryptocurrencies.
In January 2020, Singapore became among the first countries in the world to create a framework that is purposeful and clear to regulate the exchange and payments of cryptocurrencies. This was via the introduction of the Payment Services Act. This act should not be confused with the Japanese Act which implies the same literal meaning in a different language.
Even as it encourages experimentation in the blockchain space where the cryptocurrencies are used, MAS stays on its feet to address the odds of the assets being put to use for criminal activities. Money laundering is also included here.
So, how well is India placed in terms of regulation of cryptocurrencies for the present and the future? A hurried bill is not recommendable under such circumstances as it will only increase the degree of confusion. But not having regulations in place is indeed the worse option to go ahead with.
The countries mentioned in this article created regulations for cryptocurrency-related matters in a rush of sorts. But, there was a substantial reason behind the same. The nations were looking to tap into the global crypto market – valued at $1.49 Bn in 2020. By 2030, the figure is likely to reach up to $4.94 Bn. Amid 2021 and 2030; the global crypto market is expected to grow at a CAGR of 12.8%.
In case the Indian Government declines to act on the Crypto Bill, this will be a U-turn and a legislative failure of magnanimous proportion. So, it’s a situation to be avoided.
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