As some of you already know, the Indian government is planning to introduce a new bill in the house which will prohibit the cryptocurrency trade in the country. Today I will be explaining in detail the possible ban of cryptocurrency in India.
THE HISTORY
After the initial rise of bitcoin, cryptocurrency started gaining momentum in the country. But the volume of trade was only a fraction of what it is today. Mew exchanges began popping up and it was now easier to buy and sell crypto.
Since all of my readers are familiar with cryptocurrency and the decentralized structure of it I will skip that part.
The monetary agency in India is RBI and financial activities like equity trading come under SEBI. Neither RBI nor SEBI had any control over the bitcoin or ethreum trades (they were the most popular coins back then).
Even if the name suggests it as a currency, Indians considered it as a commodity(this hasn't changed yet). In the view of the Indian financial authority, it was a risky investment as these cryptocurrencies based on blockchain were not backed up by any assets.
In 2018 RBI changed the status of the industry by banning the use of bank channels for activities related to cryptocurrencies.
This was a major blowback, especially for startups that came up with the idea of crypto exchanges. All of a sudden crypto cannot be sold.
Exchanges ended their Indian operations and migrated to other countries.
WHAT DID THIS BAN MEAN?
The RBI ban simply prevented you from converting your crypto into cash. (The illegal market was still active after the ban). At the time it was said that possession of crypto was a crime, but it was still unclear.
With the said RBI ban the crypto trade in the country fell to nominal numbers. Soon investors and exchanges took this matter to court.
THE SUPREME COURT ORDER
In March 2020, the Supreme court of India lifted the ban by RBI. Soon exchanges became active.
THE LOCKDOWN
Soon after India went to lockdown, the conventional markets collapsed, and investors migrated to gold and crypto.
The trading volumes were higher than ever and exchanges began opening shops. Before the lockdown, reports came about a bill that sought to ban cryptocurrency. The bill was said to have provisions to penalize people for the possession of cryptocurrency.
As the cryptocurrency trade in India started blooming, news about this potential Bill resurfaced. As the covid 19 pandemics were crushing the country, all legislations were put to a halt.
Cryptocurrency and Regulation of Official Digital Currency Bill, 2021
India officially announced that such a bill will be presented in the house. A few days ago it was listed in the order of business for the 17th Lok sabha.
ITS IMPORTANCE
Instead of a regulation if the bill sought to ban cryptocurrency in the country, it will simply destroy approximately $1billion (approx. Value of cryptocurrency assets owned by Indians).
WILL THERE BE A DIGITAL RUPEE?
Even though the country is on the verge of banning crypto, RBI opened up on its idea of a digital Rupee, by saying that it is looking into it. After the demonization, digital transactions in India skyrocketed. Even today the number of digital transactions is growing at a very positive rate. It is very likely that a digital rupee will be successful. But, Since it is issued by RBI it will be probably a CBDC or a stable coin. It won't be a means of investment but a proper currency of nonfluctuating monetary value.
Even though the 2019 bill was speculated to be the one to ban all digital currencies, the 2021 bill is said to leave provisions open for the digital rupee.
PUBLIC AND PRIVATE
Recent reports suggest that the government will be classifying cryptocurrency as public and private. Interestingly a recent RBI communique classified bitcoin and eth as private, BTC and ETH are considered public throughout the world due to their nature but are likely to be called private currency in India.
What do people say
Interestingly, India is a highly populated country and digitalization is not yet 100%. Even if we say that crypto transactions skyrocketed the number of users is limited to a class of youngsters and conventional users who turned to crypto. Users began to express their protests on social media and were optimistic that the government will not ban it overnight.
prominent exchanges in India have already started campaigns requesting the government to hear their side before passing the bill.
WILL IT HAPPEN
YES, if the government takes the bill to the floor it will pass, as it has a majority in both upper and lower houses.
