The central government earlier this week officially expressed its intention to introduce a Bill aimed at prohibiting private cryptocurrencies in India. This came amid increasing concern over the likely threat that cryptocurrency can pose to macroeconomic and financial stability of the country, as reiterated by RBI governor Shaktikanta Das several times. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 seeks to prohibit all private cryptocurrency. In turn, it also proposes to introduce an official digital currency of the central bank, Reserve Bank of India. The government’s move came days after Prime Minister Narendra Modi chaired a review meeting regarding growing threat of cryptocurrencies where the matter was discussed at length.
The much-anticipated cryptocurrency Bill will probably ban all private cryptocurrencies in India, but this will not be a blanket ban as per sources. The Centre is set to introduce it in the upcoming winter session of the Parliament. “The bill also seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” said a bulletin released by the Lok Sabha on Tuesday. It also sought “to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India”, while also seeking to “allow for certain exceptions to promote the underlying technology of cryptocurrency and its uses…,” the bulletin added.
This makes us all wonder — What are private cryptocurrencies?
One should note that the government has not yet defined what it means by private cryptocurrency, and everything related to the proposed ‘regulation’ is still at the speculative stage. That being said, as per reports, pr esently the popular belief is that Bitcoin, Ether and other digital coins that operate via blockchain technology will not be banned.
On the other hand, crypto coins like Dash, Monero and their likes will be banned in India since they cloud the information of transactions in order to provide privacy to the user. In all probability, the government will define these coins as private cryptocurrency.
The most popular crypto coins like Bitcoin, Ether, Dogecoin and Shiba Inu are public, meaning all their transactions are completely transparent. Even though these cryptocurrencies allow users to operate under pseudonyms, the transactions on the blockchain can be seen by anyone who has access to the particular blockchain.
These cryptocurrencies are designed in a way that their transactions are traceable and linkable. On the other hand, those dealing with private information prefer to join a private blockchain, like Monero, Particl, Dash, and ZCash. In these platforms, the user’s data is encrypted and the transactions are untraceable.
Experts and analysts had mixed views regarding the proposed regulations notified by the government.
“At a very fundamental level, cryptocurrencies are based on decentralized ledger platforms which are not governed by any centralized authority such as central banks. Some of these cryptocurrencies are already pegged to USD (such as Tether). Thus, though India may patronize the use of a digital rupee as a legal tender and peg it to Indian rupee, banning other cryptos as asset
classes may not be completely feasible as it may delink India from the rest of the world using other popular / widely used crypto currencies,” opined Yashesh Ashar, Partner, Bhuta Shah & Co LLP.
On the other hand, CoinDCX CEO Sumit Gupta said he had faith in the system. ” If we go by recent statements, the government has also clarified that there will not be a ban on crypto. Our belief in the system continues to remain strong and we are certain things will shape up well as against certain narratives going on in the public domain,” he commented.
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