The latest Bill will certainly have India’s cryptocurrency traders on tenterhooks, as the fate of their crypto-wallets now hangs in the balance.
Parliament will consider a new Bill – The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 – in the current Budget Session that will, reportedly, prohibit all ‘private cryptocurrencies’ while paving the path for a sovereign digital currency to be issued by the Reserve Bank of India.
Apart from banning cryptocurrency trading on currently unregulated exchanges, the Bill also aims to “create a facilitative framework for an official currency” but will include specific exceptions “to promote the underlying technology of cryptocurrency and its uses,” according to a Lok Sabha bulletin.
Despite a number of central banks around the world growing more amenable to cryptocurrencies and the applications of their underlying blockchain technology, India’s tryst with the crypto domain has been on-again, off-again.
In 2018, a central government panel recommended the prohibition of all cryptocurrencies, proposing a prison term of up to 10 years, in the wake of a series of fraud cases following Prime Minister Narendra Modi’s decision to demonetise 80 per cent of the nation’s currency. At the time, the Reserve Bank of India argued that the currency had no material basis, also noting that the ban was needed to limit “ring-fencing” of the nation’s financial system.
The ban stirred panic among the many fledgeling cryptocurrency trading platforms in India forcing many to shutter. However, a group of these exchanges and traders appealed against the proposal at the Supreme Court via a lawsuit, and in March 2020, the apex court ruled in their favour.
The verdict boosted optimism among cryptocurrency proponents but did not amount to any material change from a policy standpoint. As such, cryptocurrency players in India currently operate within a policy vacuum but that might all change, and to their detriment, if the Bill tabled in Parliament is passed.
After a blockbuster year, new gloom on the horizon?
The timing of the Bill is also significant as it arrives on the heels of a remarkable year for Bitcoin. In early January 2021, the total market value of cryptocurrencies breached the $1 trillion mark for the first time, with Bitcoin prices rising as high as $37,000, driven by advocacy from several prominent industrialists including Tesla CEO Elon Musk.
A number of large investment houses including JPMorgan Chase & Co have also appeared to rally behind cryptocurrencies with some touting it as an alternative to gold as a safe-haven asset, especially given the economic turmoil that the COVID-19 pandemic has caused.
But the latest Bill will certainly have India’s cryptocurrency traders on tenterhooks, as the fate of their crypto-wallets now hangs in the balance. An important aspect to note though is that, while the Bill has been tabled in Parliament, this is no guarantee that it will pass in the current session. There remains the possibility that it may be referred to a special panel or deferred to a future Parliament session.
Cryptocurrency traders may also find some hope in Article 20(1) of the Indian Constitution which prohibits the government from lodging retrospective criminal charges. Article 20 (1) reads, “No person shall be convicted of any offence except for violation fo the law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.”