India’s parliament will discuss a bill that would ban private cryptocurrencies. Meanwhile, the government is examining a potential Central Bank Digital Currency (CBDC).
Local media outlets in India are reporting that the Indian government plans to ban all private cryptocurrencies. According to a report from Medianama published on Feb. 9, Finance Minister Nirmala Sitharaman told the Parliament that cryptocurrencies were not legal tender.
Instead, the government is hoping to shift the focus on a digital rupee if need be.
India’s Long-Standing Cryptocurrency Discussion
The move will trouble India’s cryptocurrency scene, which has boomed in 2020, with volumes on top exchanges growing by 500%. Many pro-crypto groups and individuals have lobbied the government to establish legal regulations. However, the government has hinted at little and has typically leaned towards a ban.
According to the official statement, Sitharama told the Parliament that,
“All private cryptocurrencies, except any cryptocurrency issued by the State, be prohibited in India.”
Private currencies include Bitcoin. The bill is currently undergoing a review and will be sent to the Cabinet for discussion and approval.
One of the stated reasons for the prohibition is the fact that cryptocurrencies are used to finance illegal activities. However, what is overlooked by authorities is that cash remains the undisputed means of funding illegal activities. Furthermore, Bitcoin is not anonymous — and companies are building tracing solutions.
A Push for CBDCs
In 2018, the Reserve Bank of India forced banks to halt services to cryptocurrency entities. The order had a severe impact on Indian investors. The Supreme Court then examined the order in 2020, declaring it unconstitutional and overturned the ban.
Pro-crypto entities cheered, but the new legislation may end their hopes once and for all. The Indian government will turn its attention to blockchain technology itself, both for a CBDC and for other use cases.
Still, India’s own crypto insiders are not entirely pessimistic. Nischal Shetty, CEO and co-founder of WazirX, said that it was good that there was more clarity from the government. He believes that the discussion is still in the early stages, which bodes well.
The government has consistently flip-flopped on its decision about crypto regulations. There is indeed a chance that it may soften its stance, limiting usability and investments. The bill will be the basis for discussion and industry insiders will be able to posit their arguments thereafter.
On the CBDC front, India hopes to be able to test a CBDC in order to keep up with the likes of China. The latter has been conducting several pilots on a CBDC with considerable success.