Is India set to ban private cryptocurrencies? Here's all you need to know

Speculation has been rife on what exactly is the government planning to do with cryptocurrencies ever since the agenda for the upcoming winter session of parliament was made public late on Tuesday. 

Among the 26 bills that the government proposes to table in parliament is the Cryptocurrency and Regulation of Official Digital Currency Bill 2021. This bill, according to news reports, seeks to ban the use of private cryptocurrencies and allow for India’s official cryptocurrency that will be issued by the Reserve Bank of India (RBI).

So, what will be allowed and disallowed?

If the source-based news reports are to be believed, the new bill is likely to say that no person shall mine, buy, generate, hold, sell, deal in, issue, transfer, dispose of or use cryptocurrency. 

What about those who already hold cryptocurrencies in India?

According to a report by business news channel CNBC Awaaz, the bill has an exit clause for those holding private cryptocurrency within a stipulated time frame. 

How exactly does the bill define cryptocurrency?

According to the same report, any information such as code, number or token that promises a price will be considered cryptocurrency.

What about blockchain, the technology that serves as the basic building block for cryptocurrency?

The technology will not be banned and can be legally used. Technology pertaining to distributed ledgers will also be allowed, CNBC Awaaz said. 

What has the government said officially about the bill so far?

According to a notification on the Lok Sabha website, the bill aims “to create a facilitative framework for creation of the official digital currency” to be issued by the RBI.

The bill also seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses, the notification says.

So, will the RBI issue India’s own official cryptocurrency?

Yes, the Indian central bank will come up with a digital currency, but there are no details on the matter yet.

Apart from this, what other rights will the RBI be given?

The new bill will give the RBI the right to recognise foreign digital currency. The RBI will also have the right to discount the product under the cryptocurrency technology, CNBC Awaaz said. 

Has any other country banned the use of private cryptocurrencies?

Yes, in September China decided to ban cryptocurrency. Other countries that have also banned or restricted the use of cryptocurrency are Nepal, Vietnam, Colombia, Russia, Ecuador, Bolivia, Algeria, Egypt and Indonesia. 

Has any country allowed the use of cryptocurrency as legal tender?

In September, El Salvador became the first country to allow the use of Bitcoin as legal tender. 

What happens to all the crypto exchanges in India that have gained popularity and attracted millions of dollars in funding?

For now, there is no clarity on the fate of crypto exchanges like Coinswitch Kuber, Wazirx and CoinDCX.