The Center is set to present the Cryptocurrency and Official Digital Currency Regulation Bill, 2021 during the winter session starting November 29. The bill seeks to create a framework for the creation of the official digital currency to be issued by the RBI.
It also seeks to ban all private cryptocurrencies in India and “will allow certain exceptions to promote the underlying technology of the cryptocurrency and its uses,” according to the Lok Sabha newsletter.
The government is unlikely to make crypto a currency, but allow the holding of digital coins as an asset like stocks, gold or bonds, sources suggest. There is also talk of appointing the Securities and Exchange Board of India (Sebi) as regulator.
So what if India bans crypto?
Estimates suggest that there are 15-20 million crypto investors in India, with a total of around Rs 40,000 crore ($ 5.39 billion) in cryptocurrency, according to various reports.
In the event the Center banned crypto, investors would be left with two main options: sell their assets or hold their crypto assets through offshore exchange wallets.
For those who want to keep their digital coins despite a ban, moving their crypto assets to self-service wallets – digital devices that work like micro SD cards – would be a smart option. These self-guarding wallets – like Ledger, Trezor, SafePal, and BitLox – store investors’ private Bitcoin key (s). If they are worried about keeping their wallet in India if banned, these wallets can be sent overseas to friends or family.
There is also this understanding that if the government decides to ban cryptocurrencies, investors would still have three to six months to sell their assets.
Why is a complete crypto ban not achievable?
Digital coins not only function as a currency, but also as an asset and a commodity. Even though they are prohibited, people can still share them with each other. Cryptocurrencies are simply pieces of computer code that cannot be banned. However, a regulatory ban would make it difficult for mainstream users to trade crypto. Most investors in India trade on crypto exchanges because they don’t understand the technical aspects of building crypto wallets etc.
Another major reason India is unlikely to ban crypto completely is the large number of investors in the country. According to media reports, nearly seven million people in India hold $ 1 billion worth of cryptocurrency. Among all digital coins, Bitcoin is the most popular in the country.
Bitcoin, the world’s largest cryptocurrency, which hovered around $ 60,000, fell to $ 55,460.96 on November 24, amid the announcement of the crypto bill in India. In fact, all major digital currencies were down around 15%, Ethereum 15.58%, and Tether 18.29%.
(Edited by : Anshul)
First publication: STI