New cryptocurrency bill: What we know so far

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The winter session of the Parliament is all set to begin on November 29, where several important bills will be tabled for debate and passage. A key bill that is expected to draw a lot of attention will be on the future of cryptocurrency in India.

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 has a key difference from the earlier cryptocurrency draft bill introduced in 2019. It omits the words “banning of” in the title. But despite the name change, the main purpose of the bill still seems to be to prohibit the use of cryptocurrencies in India.

According to the Lok Sabha website, the bill will be introduced “to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses”.

The bill will also “create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India,” the bulletin added.

The text of the bill has not been introduced to the public, and as such it may differ by a lot from the draft bill introduced in 2019.

Under the Draft Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019, the mining, holding, selling, trade, issuance, disposal or use of cryptocurrency was banned. The bill also penalised mining, holding, selling, issuing, transferring or use of cryptocurrency with a fine, or imprisonment of up to 10 years, or both.

Individuals would have 90 days to dispose of any cryptocurrencies that they possess after the bill comes into power. Individuals would be unable to use cryptocurrencies to pay for services, exchange for value, trading for other currencies, using it for financial products, for investment schemes, or as any other financial instrument.

However, cryptocurrencies could still be used for experimentation, research, or teaching with government exemptions. The government may choose to add other activities to the list of exemptions if it deems them to be in the public interest.

The bill also defined cryptocurrencies as any information, code, or token that has any digital representation of value and has an inherent value in any business activity with a risk of loss or an expectation of profits or income, or acts as a store of value, or a unit of account. The definition of cryptocurrencies in the bill was wide and even included other digital tokens that were not necessarily cryptographic in nature.
The bill also excluded the potential Digital Rupee that may be launched by the Reserve Bank of India as well as the digital iteration of any other foreign currency from being lumped in the definition of cryptocurrency.

The bill would also impose restrictions on the advertisement and promotion of cryptocurrencies and other crypto products. Promoting, advertising, soliciting or abetting the use of cryptocurrencies in any of the prohibited activities could lead to an individual facing prison time of up to seven years along with a fine.

(Edited by : Ajay Vaishnav)