Update (30/11/2021): Indian Finance Minister Nirmala Sitharaman, in a reply in Parliament on Monday, has stated that the Indian Government has no proposals to recognise Bitcoin as a currency.
Crypto ban may be on the cards in India
This week, it is game time for cryptocurrencies in India. The country’s lower house of parliament convenes to discuss 26 new bills, one of them being the Cryptocurrency and Regulation of Official Digital Currency Bill. The bill discusses the creation of a digital rupee but could subsequently also ban all cryptocurrencies deemed “private,” which would be every non-CBDC. This “facilitative framework for creation of the official digital currency” issued by the Reserve Bank of India would only allow assets that “promote the underlying technology of cryptocurrency and its uses.”
Although the same bill had previously been on the parliament’s agenda, it has not been voted into legislation yet, with India’s supreme court overturning a blanket ban on crypto by the country’s central bank in March 2020. Ever since, the Indian government has sought ways to regulate digital assets in a way that would satisfy the country’s highest court.
If cryptocurrencies are banned for good in India, it would exclude 1.4 billion Indians from legally accessing digital assets, which may have significant ramifications for the space. However, even if it does happen, lawmakers will still have to clarify how they will handle the co-existence of those projects allowed to operate in the country and a possible digital rupee. One report suggests that crypto taxes might be levied through trade and exchanges. Another potential solution suggested by officials from India’s Finance Ministry would be treating cryptocurrencies akin to commodities rather than currencies.
Prices tumble in reaction to possible ban
Prices on the Indian crypto exchange WazirX unsurprisingly took a massive hit following the news. Last Wednesday, the price of Bitcoin dropped from 4.6 million rupees ($87,000 AUD) to 3.9 million rupees ($74,000 AUD). Other popular currencies like Ether and Cardano followed suit. Prices fell back in line with the global average, even though they usually trade at a premium in India.
WazirX CEO Nischal Shetty highlighted that prohibiting the use of the word “currency” in cryptocurrency would be a more purposeful course of action considering the various use cases of digital assets that go far beyond monetary exchange. Jay Hao, CEO of crypto exchange OKEx, also suggested the government should take a more measured approach instead of excluding the country’s population from a promising new technology. BTC Markets CEO Caroline Bowler, head of Australia’s prominent crypto exchange, pondered whether such a ban would even be feasible considering the decentralised nature of the technology and the myriad ways to circumvent such a ban.
Whether this left turn will suit India’s national interests in the way the government expects it to remains to be seen. The country would follow the Chinese model of outlawing cryptocurrencies, thus joining the ranks of several authoritarian countries that prefer to outlaw crypto instead of using the technology’s possibilities. The split between countries in favour of crypto and those against it continues to deepen.
