Indian Government Submits Bill to Ban Most Cryptocurrencies, Dashing Hopes for Friendlier Measure

While the bill might be the same as the draft submitted in January, expectations had grown that the government would submit a final version that would be accommodative to crypto.

Nov 23, 2021 at 2:53 p.m. UTC
Updated Nov 24, 2021 at 9:50 p.m. UTC

The Indian government is still seeking to ban most cryptocurrencies under a long-awaited cryptocurrencies bill that will be submitted for consideration at Parliament’s so-called “Winter Session” this year.

According to a bulletin posted on Lok Sabha, the Indian parliament’s official website, The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, aims to create a framework that would facilitate the creation of a central bank digital currency (CBDC).

“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 bulletin said.

Crypto prices tanked on Indian crypto exchanges after the bill was announced. Bitcoin fell more than 13% on WazirX, while shiba inu and dogecoin both fell more than 15% in the hours after the revelation. These price moves were limited to Indian trading platforms however, with the price of bitcoin staying in the green on non-Indian platforms.

While the measure appears to be essentially the same as the draft bill submitted in January, it is unclear whether the two are identical since the latest draft is not yet publicly available. However, expectations had grown in recent months that the government had potentially softened its view on crypto and would perhaps seek to have cryptocurrencies regulated as assets instead of a means of payment.

“[The latest bill] is a mystery as it was never made public. So it’s hard to know but from what we know this can be an amended version of the initial banning draft that was introduced by the IMC committee headed by Subhash Chandra Garg,” said Aditya Singh, co-founder of Crypto India, an Indian YouTube channel with around 200,000 followers.

Singh added that although the title and description of the draft bill look identical to the one looking to ban all private cryptocurrencies, there is a “high probability” that the contents had changed. Singh cited India’s Finance Minister Nirmala Sitharaman’s recent statement that the government will not move forward with a blanket ban on crypto as an indication that the bill may have undergone some changes.

According to a video report by local news publication India Today, crypto trading is likely to continue under the proposed bill as long as users buy from crypto exchanges that meet certain requirements. The report said that the bill might focus more on restricting who is allowed to create or issue new cryptocurrencies with the aim of protecting investors.

The Reserve Bank of India (RBI), its central bank, is known to have conservative views about crypto. India’s supreme court overturned a crypto trading ban imposed by RBI for two years in March 2020, and the central bank initially planned to fight the ruling. Last week, RBI Governor Shaktikanta Das said the central bank has “serious concerns from the point of view of macroeconomic and financial stability” and that blockchain technology can thrive without cryptocurrencies.

As the government bulletin indicates, the framework seeks to pave the way for an RBI-issued digital currency. Earlier this month, local media reported that RBI is hoping to pilot a CBDC in 2022.

Meanwhile, earlier this month, the Indian government seemed to ease up on crypto, hinting that it would take a more progressive and forward-looking approach to digital assets. But last week, India’s prime minister Narendra Modi said in a speech that, “It is important that all democratic nations work together on this and ensure it does not end up in wrong hands, which can spoil our youth.”

Despite indications that the bill seeks to ban the use of private cryptocurrencies, Nischal Shetty, founder and CEO of WazirX, one of India’s leading crypto exchanges, sees the bill as progress, and called it a “big moment” for India.

“From a banking ban in 2018 to listing the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the Parliament’s winter session. Our nation has come a long way in these three years!,” Shetty said in a written statement.

Singh had a more tempered reaction to the proposed bill, saying the Indian crypto community feels the bill “will be a progressive bill as compared to the previous one but how progressive we will have to see.”

The Parliament’s Winter Session is expected to kick off at the end of the month.

UPDATE (Nov. 23, 18:01 UTC): Updated with additional information and background throughout, and notes that the new bill may be, but is not definitely, the same as the draft submitted in January.

UPDATE (Nov. 23, 18:35 UTC): Adds additional information about crypto market prices in India.

UPDATE (Nov. 23, 20:48 UTC): Corrects that Modi originally made a statement in a speech, not on Twitter.

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