Government to bring bill to ban all ‘private cryptocurrencies’

The government is set to introduce the “Official Digital Currency Bill, 2021 on Cryptocurrency and Regulation” in the winter session of Parliament that begins on November 29. The bill aims to “create a facilitating framework for the creation of an official digital currency”. To be issued by Reserve Bank of India. The bill also seeks to ban all private cryptocurrencies in India, however, it allows certain exceptions to promote cryptocurrency and the technology underlying its use,” it said in a notification on the Lok Sabha website.

The definition of private crypto-currencies is yet to be clarified by the government. By some definitions, bitcoin, ethereum, and many other crypto tokens are based on public blockchain networks, meaning that transactions made using the network can be traced, while still providing users with a degree of anonymity. . On the other hand, private cryptocurrencies can refer to Monero, Dash, and others, which although built on a public blockchain, obfuscate transaction information to provide privacy to users. In short, while Bitcoin provides anonymity, Monero offers privacy and is, therefore, a private token.

A sweeping ban would force crypto exchanges to cease operations in India. Huobi, one of the largest crypto exchanges in the world, had to do the same when China issued a complete ban on crypto in September. On November 8, the exchange’s founder told the Financial Times that its revenue from Chinese users would be zero during the September to December quarter.

“There are two factions within the government – ​​one that wants to ban crypto and one that wants to regulate it. But since the regulatory landscape was unclear, the first group is the one that is coming out on top.” in 14 days. Or they can also do an ordinance, which will be faster,” said the expert.

Nischal Shetty, CEO of India’s largest crypto exchange platform WazirX, tweeted: “Crypto Regulation Bill is listed for winter session. Details haven’t changed much. Speculations will be made on both sides. More people within know how crypto works.”

However, as several industry executives and experts noted last time such a ban was in place, it may be technically impossible to ban cryptocurrencies. Industry executives said the government could block the use of local currency to buy crypto, but there is no way to ban crypto wallets, which exist online and are not under the purview of banks and governments. Peer-to-peer networks are also difficult to police because people can transfer money to each other via bank accounts and similar crypto transfers between each other via wallets.

Following a meeting of the Parliamentary Standing Panel on Finance on Cryptocurrencies last week, panel chairman Jayant Sinha told CNBC TV18 that it is important to balance innovation and regulation. Citing crypto exchange representatives who attended the meeting, Sinha said that the various exchanges together have 15 million KYC-approved users with an investment value of $6 billion. According to an October report by research firm Chainalysis, India ranks second globally in terms of “crypto adoption”.

Avijit Banerjee contributed to the story.