Indian Government Revisits Cryptocurrency Ban Bill: What’s Next?

The Indian government has long grappled with the regulation of cryptocurrencies. The “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019,” drafted by an inter-ministerial committee (IMC) headed by former Finance Secretary Subhash Chandra Garg, has remained dormant for over a year. Recent reports suggest renewed consultations on the bill, but no official confirmation has been provided.

The proposed bill could impose a blanket ban on cryptocurrencies, potentially criminalizing activities like mining, holding, advertising, promoting, buying, and selling digital assets. Here’s what we know so far.

The History of the Cryptocurrency Ban Bill

1. Drafting of the Bill

• In 2019, the Indian government commissioned the IMC to examine issues surrounding cryptocurrencies.
• The IMC’s report recommended a complete ban on private cryptocurrencies, citing risks to financial stability and consumer protection.

2. Mohammed Danish’s RTI Inquiry

Mohammed Danish, co-founder of Crypto Kanoon, filed an RTI application with the Department of Economic Affairs (DEA) to inquire about the bill’s status.

The DEA’s response stated:

“The report of the IMC on VCs [virtual currencies] has since been submitted by its members, but is awaiting approval of the government. The report and bill will now be examined through inter-ministerial consultation by moving a cabinet note in due course.”

Key Provisions of the Proposed Bill

1. Blanket Ban on Cryptocurrencies

The bill seeks to prohibit:

• Mining and holding cryptocurrencies.
• Advertising and promoting digital assets.
• Buying, selling, and providing exchange services for cryptocurrencies.

2. Strict Penalties

If enacted in its current form, the bill prescribes severe punishments for any involvement with cryptocurrencies.

Implications of the Cryptocurrency Ban

1. Impact on Crypto Ecosystem

• A ban would stifle innovation in the blockchain and crypto industries.
• It could deter global investors from engaging with India’s digital economy.

2. Concerns Raised by Experts

Danish highlighted that such a stringent law could harm India’s technological progress:

“If this bill is converted into law in the present form, then no sector can survive.”

Government’s Perspective on Cryptocurrencies

1. Cautious Approach

The government’s primary concern revolves around:

• Risks to financial stability.
• Potential misuse of cryptocurrencies for illicit activities like money laundering.

2. Push for Official Digital Currency

The Reserve Bank of India (RBI) has shown interest in launching a central bank digital currency (CBDC), which aligns with the government’s stance on promoting regulated digital currencies.

What Lies Ahead for the Crypto Bill?

1. Consultations Underway

Media reports suggest that consultations regarding the bill have resumed. However, no official confirmation has been made.

2. Ministry of Finance’s Role

The Ministry of Finance may have reservations about the current draft, as suggested by Danish. The DEA’s references to the use of “government” hint at a broader push for more controlled adoption of digital currencies.

Conclusion

The “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019” reflects the Indian government’s cautious stance toward cryptocurrencies. While consultations may signal progress, the proposed blanket ban raises concerns among industry stakeholders and experts.

If passed in its current form, the bill could have significant repercussions for India’s crypto ecosystem, potentially stifling innovation and deterring investment. As the government deliberates on its next steps, the global crypto community watches closely.

To stay updated on the latest developments in cryptocurrency regulations, explore our article on latest news, where we analyze the evolving legal landscape shaping digital finance.