The Indian Cryptocurrency Bill 2021: A Bill to Love or Loathe?
The Crypto Regulatory Approach of India
Largely since the last couple of years, the development of cryptocurrency in India has been taking a laissez-faire regulatory approach since the first recorded transaction in 2010. However, the Indian government had proceeded with extra caution and was actively alerting users about the potential risks of cryptocurrencies between 2010 and 2018. However, these fears were, in fact, quite legit, rooted in the sheer volatility, their susceptibility towards hacking, and the fact that they could be used in criminal activities such as money laundering, financing terrorism, and tax evasion, rather than developing a framework around it to attend to these issues.
The Reserve Bank of India imposed a ban on cryptocurrency trading altogether. This ban was overturned by the Supreme Court two years later, in 2020. The apex court's reason was that there are alternative measures instead of an outright ban, which RBI could use to curb the potential risks of cryptocurrency trading. Since then, there has been confusion and wait around cryptocurrency regulation, which may end soon.
Recently, the government of India listed the 'Cryptocurrency and Regulation of Official Digital Currency Bill, 2021' for the coming winter session of Parliament.
For about two years, the future of the cryptocurrency landscape was pivoted on what it would be named. Earlier the name of the draft was suggested as "Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019." But that gave a poor outlook for a decentralized ecosystem with non-fiat coins. The new Bill's name drops out the word Ban, and the prohibition of all private cryptocurrencies could suggest the end of the road for cryptocurrencies such as Monero (XMR), ZCash (ZEC), and more.
There happens to be a mention of "Official Digital Currency," which portrays the intent and ambition of both RBI and GOI to launch India's own CBDC (Central Bank Digital Currency). It also reported that RBI could do a pilot test of CBDC in the first quarter of next fiscal.
The proposed legislation also seeks to make those who infringe the law subject to arrest without a warrant.
In all of this fear and confusion, the government's plan has cracked down heavily on Crypto trading and has sparked a frenzy in the market-leading to severe losses to many significant investors. From Ban to Regulation, there is much scope for a thoughtful regulatory approach. The mindful thing could be for the regulatory toolbox to accept, not reject, the evolved world of Cryptocurrency.
Blockchain and cryptocurrencies have the potential to disrupt human life for good. It is essentially a decentralized approach to creating trust and value, and it eliminates the requirement of intermediary, thus removing the commission/cut. Since Intermediaries have limited working hours, they also cannot support microtransactions. Blockchain solves all these problems. An outright ban could evolve into a catastrophe as it would deny people the right to choose the medium of exchange they want for a transaction. A stop on cryptocurrency trading could result in a disconnected India on a global market.
Inspirations, Insights, and Democracies
As the draft bill is yet to hit the floor, there are hopes that these issues could be addressed with a bespoke form of a regulatory approach rather than an outright ban.
India can look up to other countries for inspiration or lessons, such as the U.K., Singapore, and the U.S. Recently, the United Kingdom has classified Cryptocurrency as property and has somewhat paved a path for cryptocurrencies to be included within the framework of regulation legally in the country's economy. Still, the Bank of England rather stays skeptical of it. The United Kingdom has sought to regulate the functioning of Crypto-business while keeping a short leash on them by imposing restrictions to protect the interests of investors. Singapore holds no exact legal classification of cryptocurrency, the amenability of cryptocurrency transactions to the contract law framework of the country is strongly established. Moreover, there is now a legal framework for crypto trading as well.
The United States of America took a more constructive and open approach which taxed and appropriately regulated the cryptocurrency trade. While no such approach can be blindly implemented into India's Economy, the global regulatory approach can give vital insights into alternative methods for approaching an equilibrium of balance for regulations around the crypto-verse. The lack of an existing legal framework should not be an impetus or a precursor to a complete ban. The government should take this opportunity to democratically allow individuals the freedom to tap into the power of this new technology whilst putting in appropriate regulatory standards.