The government is set to introduce a proposed bill to prohibit private cryptocurrencies. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 will function with few exceptions to promote the underlying technology and its uses. The Bill also seeks to create an official framework for running the official digital currency to be issued by the RBI.
In November 2017, the Government had formed a committee to look after the issue pertaining to the crypto currency. In July, 2019, that committee submitted its report asking for to ban the usage of private crypto currency in India.
The RBI understands crypto currency as a form of digital/virtual currency generated through a series of written computer codes that rely on cryptography which is encryption and is thus independent of any central issuing authority per se. It is facilitated through blockchain technology and has emerged as a person-to-person issuance and transaction system that uses private and public keys that enable authentication and encryption for secure transactions. At the beginning of April 2018, the RBI issued a circular preventing all commercial and co-operative banks, small finance banks, payment banks and NBFC from not only from dealing in virtual currencies themselves but also directing them to stop providing services to all entities which deal with virtual currencies. This essentially broke down the crypto industry as exchanges needed the banking services for sending and receiving the money necessary for converting it into cryptocurrency and for paying salaries, vendors, office space etc. However, the circumstances prevailing around cryptocurrencies and their usage completely changed on 4th March 2020, when the Apex court of India i.e., Hon’ble Supreme Court of India, in a well-conceived judgment passed a decision quashing the earlier ban imposed by the RBI. The Hon’ble Supreme Court of India predominantly examined the matter from the perspective of Article 19(1)(g) of the Indian Constitution, which specifies the freedom to practice any profession or to carry on any occupation, trade or business, and the doctrine of proportionality.
If the ban on private cryptocurrencies is put up by the Government, then a possible scenario would be that the crypto currency investors would deal in cryptocurrency in unmonitored markets. Based on the inference that can be drawn from the aforementioned facts and present scenario revolving around the world of cryptocurrencies, it is evident that there is a lack of clarity with respect to cryptocurrency regulation in India. A well-structured cryptocurrency regulation with respect to crypto trading exchanges, blockchain technology, investors, and the people employed in such sector is the need of the hour and thus such regulation needs more attention.