India’s Cryptocurrency Bill Confuses Plan to Ban “Private Cryptocurrencies”

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Prime Minister Narendra Modi’s government said on Tuesday it was preparing to introduce a bill that would regulate digital currencies.

There is still a lot of unknowns about the proposal. An encrypted description of the bill posted on the Indian Parliament website describes a plan to “ban all private cryptocurrencies in India.” But the bill also says it would allow “certain exceptions to promote the underlying technology of the cryptocurrency and its uses.”

The Modi government is also keen to help the Reserve Bank of India, the country’s central bank, create an official digital currency, according to the notice posted on the bill.

This language leaves a lot of room for interpretation. The bill did not specify what is meant by “private” cryptocurrencies, so it is not clear whether this applies to the world’s most traded coins, including bitcoin and ethereum. India’s finance ministry did not immediately respond to questions from CNN Business on the bill.

The proposal will be presented to parliament in a session that begins on Monday.

A story of tensions

This is not the first time that potential restrictions on digital currencies have irritated crypto traders and investors in India, one of the fastest growing economies in the world.

In 2018, the central bank banned Indian banks from dealing with cryptocurrency exchanges, citing “concerns about consumer protection, market integrity, and money laundering, among others.”

Two years later, this ban was overturned by India’s highest court. But investors continue to fear that Modi’s government – which has likened cryptocurrencies to “Ponzi schemes” – will drop the hammer. In March, Reuters reported, citing anonymous sources, that the government planned to “fine anyone doing business in the country or even holding such digital assets.”

So far, such fines have not materialized. And some of India’s top government officials took a milder tone when discussing these assets.

The finance minister said in March that “we are not closing all options” and that the country “will leave some window for people to experiment with blockchain and bitcoin”.

Anirudh Rastogi, founder of tech law firm Ikigaw Law, told CNN Business that the government is wary of cryptocurrency because it can be used for money laundering and tax evasion. The government is also concerned about the impact on investors.

“Some of these coins can be quite fraudulent,” said Rastogi, whose company represented cryptocurrency exchanges in the Supreme Court case that challenged the 2018 central bank ruling. Imposing a blanket ban, India would be out of step with important global technological and business developments in blockchain. “

Popularity in India

Virtual currencies are attractive to Indians. Although the government does not keep estimates of the number of people who trade cryptocurrencies, the media have suggested that the country could hold up to 20 million crypto investors, citing industry experts. This year, at least two crypto exchanges have achieved unicorn status – a term used for startups valued at over $ 1 billion – with funding from prominent investors such as Andreessen Horowitz and Coinbase Ventures. These platforms have also used some of Bollywood’s biggest players to promote bitcoin in TV ads and newspapers.

Some crypto experts agree that regulation is needed in India – it’s just a matter of finding the right balance.

“Don’t panic,” tweeted Nischal Shetty, the founder of cryptocurrency platform WazirX, after the new bill was announced. “We all want regulation. We’ve been pushing for this for over 1,000 days.”

“We must have confidence in our lawmakers. There will be discussions and deliberation.” he added. “Ultimately, innovation will win.”

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