What happened? On Tuesday India’s lower house of parliament, Lok Sabha, published the agenda for the Winter Session of the Parliament. According to the publication, 26 new Bills are listed for introduction in the Winter Session, including The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
The document states that lawmakers would work on a two-fold agenda. The first is to create “a facilitative framework for creation of the official digital currency” and the second one being to “prohibit all private cryptocurrencies in India” but with some exception.
“To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Poor Homework By The Government Allows Media Houses To Publish Misleading News Of Crypto Ban And Cause Panic Among Investors
The problem with this ‘poor homework’ by the government is that its “The Bill also seeks to prohibit all private cryptocurrencies in India” line is good enough for creating misleading headlines.
The announcement was falsely reported by the Indian media houses as the government was considering to ban Bitcoin and other cryptocurrencies. It has already made several in the mainstream media, including Hindustan Times, TechCrunch, ToI, Business Insider, CoinDesk, WION, and PYMNTS.com, all of which have published the news as a confirmed ban on Bitcoin and several other cryptocurrencies.
For example, CoinDesk, one of the leading and highly reliable cryptocurrency new site, covered the news with headline “Indian Government Submits Bill to Ban Most Cryptocurrencies, Dashing Hopes for Friendlier Measure“.
As expected, the news sent waves of panic across the Indian crypto market causing cryptocurrency prices to crash around 30% across several Indian exchanges. This panic even led to Bitcoin (BTC) and other cryptos trading at 20-40% discount to international market, whereas it usually trades at a premium of up to 10%.
The international crypto market, however, did not reacted as much on the news coverage by the media houses. It clearly shows that the Indian crypto market is although big but investors are not mature enough to analyze the news. And, the impact of India’s policy on global cryptocurrency market is not comparable to its economic influence on the world economy.
Is The Indian Goverment Really Considering A Ban?
The current proposed crypto bill listed on the agenda of the parliament is same as it was listed in Feb 2021. The details of the bill are still not public. Nothing can be comprehended what the government was actually considering. But, the past series of events around crypto regulation in India do offer a positive outlook.
India Crypto Policy – Series Of Events
The government was initially considering a blanket ban on crypto. In 2019, an inter-ministerial committee headed by Finance Secretary Subhash Chandra Garg also suggested a jail term of 10 years for holding and trading cryptos.
In 2018, RBI issued a circular directing banks to not serve crypto exchanges. It was challenged in the court by crypto community in India. The court found the step unlawful and directed banks to provide services to cryptocurrency exchanges.
Indian crypto community kept engaging and educating policy-makers in India. It eventually forced the government to rethink their approach with the changing global scenario.
In March 2021, the Indian Finance minister Nirmala Sitharaman clarified that the government will not completely ban cryptocurrencies or at least the technology part of it.
“From our side, we are very clear that we are not shutting all options. We will allow certain windows for people to do experiments on blockchain, bitcoins or cryptocurrency,” Sitharaman had said at an India Today conclave.
She said FinTech depends on such experiments and it will have that window available. “We are not going to shut it off,” she said.
In September 2021, Indian business news portal The Economic Times reported, citing three people aware of the development, that the Indian government was planning to regulate Bitcoin and other cryptocurrencies as commodities based on the use cases.
“The government is planning to define cryptocurrencies in the new draft bill that also proposes to compartmentalise virtual currencies on the basis of their use cases,” The publication noted:
As per the reports, Cryptocurrencies will be treated as an asset/commodity for all purposes, including taxation and as per use case — payments, investment or utility.
Crypto Investment In India Growing Exponentially
India is experiencing exponential growth in cryptocurrency investment and trading. According to Chainalysis, the total investments in digital assets in India is currently valued at over US$ 6.6 billion. The crypto market intelligence firm said that it was just US$923 million in April 2020.
The huge jump in investment is a testament to the growing demand for crypto investment in India. Indians are investing in cryptocurrency despite continuous disapproval from the Reserve Bank of India (RBI).