In 2019, there was a recommendation by an Indian government panel to ban all private cryptocurrencies including Bitcoin with a 10 years jail term for offenders. The Panel also recommended that the government looks into creating a digital version of its fiat currency, which they fear would be rendered weak were cryptocurrencies allowed to be freely used in the country.
Well, while the 2019 notice sent shockwaves to blockchain startups and companies indulged in crypto trading within India, there were still hopes that the panel’s recommendations could not be adopted.
However, things took an ‘ugly turn’ for cryptocurrency enthusiasts in India after it emerged that the government seeks to introduce a law banning all personal cryptocurrencies including Bitcoin from being used in India. The law is set to be discussed in Parliament during the current parliament’s session, making it quite an urgent matter.
Agenda published on the lower house website this Friday
According to an agenda published on the Lower house this week, besides banning private cryptocurrencies, the legislation shall also provide a facilitative framework for the Reserve Bank of India (RBI) to create an official digital currency.
According to the RBI, the digital currency could be a digital version of India’s fiat currency.
The law will however exempt certain blockchain networks and their respective cryptocurrencies to promote the underlying blockchain technology and its uses.
Financial institutions caught in the middle
In 2018, the RBI ordered all financial institutions including banks to distance themselves from businesses and individuals dealing in cryptocurrencies such as Bitcoin.
However, in March 2020, the Supreme Court allowed banks to handle crypto transactions from traders and crypto exchanges.
If the current proposed law is to be passed and implemented, financial institutions that had invested in cryptocurrencies may be dealt a blow since the ban would affect them in a major way.
Governments around the world have been looking into ways of regulating cryptocurrencies
Since the onset of blockchain technology and cryptocurrencies, governments around the world have been actively looking for ways to regulate the cryptocurrency market which is largely unregulated due to its decentralized nature.
However, a majority of the governments have not taken such drastic measures as India has taken of indicating intentions of banning private cryptocurrencies totally in their countries. There have only been opinions and warnings by various governments and regulatory authorities from different parts of the world about the danger and risk that cryptocurrencies hold.
When the new US administration was getting into office, there were echoes to look into cryptocurrencies for fears that they were avenues that criminals would use.
The major concerns about cryptocurrencies have been in misuse of consumer data and their impact on the traditional financial systems including fears that they would eventually render fiat currencies useless.
The FCA also gave a warning in mid-January 2021 that cryptocurrency investors should be prepared to lose everything in case of anything. This is after it banned the FCA banned the sale of any cryptocurrency derivatives to retail investors in the UK early this year.
Could India lead the way for governments to introduce their versions of officially regulated digital currencies?
Well, the answer to that lies with what the future holds.
But from the various signals from governments and regulatory authorities around the world, cryptocurrencies are still a thorn in the flesh to most if not all of them. In the US for example, where cryptocurrencies are adopted by a majority of the population, the Securities Exchange Commission (SEC) has filed several lawsuits targeting several blockchain projects including Facebook’s intended cryptocurrency launch.
The UK has already put in place a ban on the sale of crypto derivatives to retail investors in the UK.
Some countries like Algeria, Bolivia, Morocco, Nepal, Pakistan, and Vietnam have also banned any activities involving cryptocurrencies.
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