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The Indian government has come out with a shocking declaration that they don't have the proposal to recognize bitcoin as a legal tender or the currency of the country. The country's Finance Minister, Nirmala Sitharaman has said that the government doesn't collect data on bitcoin transactions when asked if they know how many people engage in it. This comes days after the Indian government has introduced a Bill to regulate or ban private cryptocurrency in India.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, will be tabled in the winter session of Parliament. According to the bill, all private digital tokens will be banned except for the government-backed cryptocurrency. However, it allows for certain exceptions to promote the underlying blockchain technology of virtual currencies and their uses. The cryptocurrency bill came to light when Prime Minister Narendra Modi chaired a meeting on November 13, to discuss the regulatory motive of cryptocurrency with top leaders in the central bank and the Ministries of Home Affairs and Finance. The meeting concluded with Modi announcing that the Indian government will take steps to stop 'attempts to mislead the youth through over-promising and non-transparent advertising.' During the meeting, it was also resolved that the government is taking adverse steps to stop avenues of money laundering and terror financing with cryptocurrency.
However, this is not the first time the government has come up with a bill on cryptocurrency in India. Earlier, in May, the government proposed a similar bill. Back then, a committee was also formed to provide recommendations on the matter. But crypto investors were pretty relaxed when the bill was discussed as all signs suggested that the government may not ban digital tokens but look to regulate them. Unfortunately, things are different this time. One thing that concerns crypto investors is the mention of all private currencies in the bill. The government has already stated that bitcoin has no special status and does it mean BTC will also be banned? While everything seems unsettling, experts say that wiping cryptocurrency in India completely will be a difficult task for the government.
More than a complete ban, the talk on private currencies has heated up since the Indian government has come up with a cryptocurrency bill. Although the government is yet to clarify its stand on private currencies, we explore what it could possibly mean.
On a general scale, most of the digital tokens are actually public currencies since the transactions can be traced or linked to the wallet addresses. On the other hand, a few currencies hide users' wallet addresses and balance while engaging in transactions. Those are referred to as private currencies.
While this seems to be a convincing answer, experts also wonder if the government is just calling all the other countries except for central government-backed currency as private currency. Currently, there are over 11,000 cryptocurrencies in circulation in India. More than 99.9% doesn't come under the government's umbrella. This includes famous digital tokens like Bitcoin, Ethereum, Dogecoin, and Shiba Inu.
Since the Bitcoin price rally in 2020, cryptocurrency in India has drastically surged. Mirroring the statement, the transactions of digital tokens in India rose as much as 30% in volume during the past year, with Bitcoin, Ripple, and Shiba Inu leading the race. According to a Chainalysis report, Vietnam, India, and Pakistan have secured the first three places in cryptocurrency usage. However, India topped both Vietnam and Pakistan on crypto activity with 59% while the other recorded 47% and 33% respectively.
Although shutting the door for cryptocurrency in India is a possible task, the government will have a hard time streamlining it. On the other hand, the centre will try its best to roll out CBDT, which is expected to be unraveled by the Reserve bank of India. In 2018, the RBI told banks not to engage in any trucks with virtual currency exchanges or traders. The imposition was knocked off by the Supreme Court in 2020. However, India is not the only country to impose such restrictions.
In 2020, Turkey attempted to ban cryptocurrencies amid facing high inflation. But the country failed to do so.
Nigeria's central bank has prohibited banks from supporting any crypto transaction in February 2021.
China's stance on cryptocurrency is a world-known matter. The country has been trying to ban digital tokens since 2013 and only succeeded in 2021 when it imposed a blanket ban on all cryptos.
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