Cryptocurrency: Static on the side-lines

This week has seen the renascent global benefit in cryptocurrencies, with Elon Musk breaking headlines by investing more than $1.5 billion in Bitcoin. In India, even so, cryptocurrencies (like Bitcoinand Ether) are presently trading at a discount. 

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This is mostly because cryptocurrencies have been in operation in a regulatory grey area. In 2013, the Reserve Bank of India elevated concerns over the possible financial, operational, legal, and consumer protection risks coming up from cryptocurrencies. 

In 2018, the central bank issued an order stating that banks and financial institutions shall not trade with crypto-related businesses, and all regulated entities decreasing within the purview of RBI shall stop render services to such platforms. The Supreme Court struck down the provisions which figuratively banned crypto-trade in 2020. 

In the meantime, the government has wanted to initiate draft bills to regulate/ban cryptocurrencies. The ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ is to be arranged earlier in Lok Sabha in this session. The current bill seems somewhat more positive and forward-looking than the previous one, styled the ‘Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019’. It appears to advise that instead of an unlimited ban, the government intends to regulate cryptocurrencies. 

Though the text of the projected 2021 bill is not still out, the gist of the regulations accessible on the Lok Sabha website appears to highlight that this is indeed not the case as under the 2021 bill only RBI will be authorized to create an official digital currency. The cause of cryptocurrencies such as Bitcoin and Ether is shaded as the 2021 bill seeks to forbid ‘private cryptocurrencies’ though it is not clear what would be advised as a private cryptocurrency.