Cryptocurrency and Regulation of Official Digital Currency Bill, 2021
Cryptocurrency is an online medium of exchange used by the users of public key and private key, the most common form of cryptocurrency is the bitcoin which is now held by millions of people across the globe. With the onset of Indian government’s implementation of cryptocurrency and regulation of official digital currency bill, which intends to create a ban on the private currencies, the Reserve Bank of India being a statutory regulatory body is all geared up to introduce a legal regulatory framework to launch a digital currency across the country. An Inter – ministerial panel which also included representatives from the Reserve Bank of India decided and recommended to launch the ‘cryptocurrency and regulation of official digital currency bill’, as they suggested that it would hamper the financial stability of the country. The Bill is believed to be passed in the ongoing 2021 budget session of the parliament. With a rapid increase in the number of cryptocurrency users, it is expected that the government would launch a ban with certain exceptions to facilitate the juggernaut cryptocurrency technology. As a result of which, the Reserve Bank of India instructed all the entities regulated by it to not deal with cryptocurrencies and to not provide services to corporates or individuals dealing with it.
The first bitcoin was first coined in the year 2009, later in 2010, bitcoins gained attention by being traded across countries. In 2013, there was a drastic jump in the prices of bitcoins not only in India but all over the world. In 2018, the Reserve Bank of India had instructed all the financial institutions to cut ties with in three from all the entities and individuals engaged using cryptocurrency such as bitcoins, etherum, etc. In mid of 2019, the government panel suggested to prohibit all the private cryptocurrencies, with a penalization of imprisonment upto 10 years and severe fines for those using the digital currency. In march 2020, the Supreme Court, by pronouncing judgement in the case Internet and Mobile Association of India v. Reserve Bank of India, 2020 SCC 275 lifted the ban on cryptocurrencies and struck down the circular issued by the RBI, saying the ban on the use of cryptocurrency is unconstitutional and violates the fundamental right under article 19(1)(g).
Now that the bill is said to come into force this year, the bitcoin holders are spooked. It is to be noted that the prices of cryptocurrencies like, bitcoins and ethereum have jumped high by setting a high record and the befall of the bill has left them in distress. The bitcoin holders are in a state of suspense as the bill is said to be passed in the parliamentary budget session of 2021. As the details of the bill are not yet made visible to the eyes of the public, the certainty of the ban on cryptocurrency is a big question mark, which has caused confusion to the bitcoin holders.
Although, the government does not issue digital currencies, the forms of crypto currencies do not fall under the category of private currency. In the light of that, the hopes of the bitcoin holders are alive as the ban is only pertaining to the private currencies and not the public currencies. An optimistic approach towards the ban of the cryptocurrency is through the interpretation of the term ‘private cryptocurrency’. As the crypto transcations in india has faced a huge jump after the entry of bitcoins into the country on account of which the government may not put a complete ban on bitcoins. As of the view of some industrialists, even if the cryptocurrency usage is banned in India, it would be done in a way that safeguards the interests of bitcoin holders. The bitcoin holders still have an option to trade in international transaction using there existing digital coins, as a result of which they need not worry about loss of money. A complete ban on the cryptocurrency is quite impossible as of now according to media reports.
Ban of Cryptocurrency in Other Countries
Unlike the other centralized digital currencies, bitcoins function under a decentralised survelliance system. Despite of rapid rising in the value of bitcoins, some countries have banned bitcoins. For instance, countries like Saudi Arabia, Bolivia, Algeria, etc have banned the cryptocurrencies for one main reason, that, the regulation of it is cumbersome as there is no centralized controlling authority to monitor it. The countries also are of the view that cryptocurrency would facilitate criminals connected with money laundering and evasion of tax. As Saudi Arabia is of the view that cryptocurrencies are inconsistent with the muslim laws it has outlawed cryptocurrency. One simple reason for the countries like Bolivia and Iceland to ban cryptocurrencies is to have full control over all the monies being circulated in its country. They ban bitcoins to prohibit a lot of monies leaving their countries. With no control and presence of anonymity, there is high possibility for the risk of theft which can be used for funding terrorism. Cryptocurrency is also highly vulnerable as, if once lost its lost forever, to retrive it is difficult.
Need of the hour is to build a centralized digital payment system over which the regulatory body has control and surveillence and at the same time India should explore ways to uphold the interest of the bitcoin holders. The Indian government’s decision to ban the use of cryptocurrencies has created a hostile situation among the bitcoin holders and if the central government has not come-up with any alternative method to the transaction using digital currency. So, the RBI’s framework must strike a balance between the interest of all the parties involved. It is important to know whether the central government will adopt a balanced approach towards the regulation of cryptocurrencies and proper implementation of official digital currency. If yes, the RBI’s official digital currency will definitely serve its purpose.