The topic of cryptocurrencies has been widely discussed recently. Decentralized digital currencies protected by encryption were discussed in a prime ministerial meeting, a statement from the governor of the Reserve Bank of India, and a flurry of commercials were shown during cricket games. On November 23, it was announced that a draught law regulating cryptocurrencies would be presented to the Lok Sabha.
There has been much debate about whether the law would outright forbid cryptocurrencies or make an effort to regulate them.
Cryptocurrency proponents assert that digital currencies reduce transaction costs and increase financial system transparency. However, the lack of government regulation over such tools has some skeptics concerned that they may be used to finance illicit operations.
What you need to understand about the circumstance is this.
The government will present the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, according to the Lok Sabha bulletin published last week that contained the schedule for the winter session of the Parliament. The bill’s purpose Billo “establish a framework that will facilitate the development of the official digital currency that the Reserve Bank of India would issue.”
The bulletin stated, “The Bill also attempts to outlaw any private cryptocurrencies in India.” “However, it provides for specific exclusions to promote the cryptocurrency’s underlying technology and its purposes.”
Officially, this is the only information available regarding the Bill. Billever, media outlets have made assumptions about what it may include. Some claim that the Reserve Bank of India favors an absolute ban, even though the government may not be. According to some sources, just a few cryptocurrencies may be permitted, and cryptocurrency earnings may be subject to high taxes.
According to a different story, the government would outlaw all cryptocurrencies and set a transition time for anyone who already owns them.
During the current Winter Session of Parliament, the Central Government will present the Cryptocurrency and Regulation of Official Digital Currency Bill 2021. There have previously been rumors that India’s government may outright forbid cryptocurrency. However, according to official sources, recent reports have suggested that the government may permit trading and investment in cryptocurrencies with some limitations.
According to crypto specialists, it won’t be able to outlaw cryptocurrency entirely. However, the use of cryptocurrencies as a medium of exchange or a payment method may be prohibited or subject to regulations by the government. Cryptocurrencies that are not controlled by a single entity exist on the blockchain. Blockchain differs from other digital currencies that a single body could manage because of its decentralized nature. Governments have the power to outlaw both cryptocurrency trading and the use of cryptocurrencies as payment methods, according to Edul Patel, CEO, and Co-Founder of Mudrex, a worldwide algorithm-based crypto investing platform.
“Exchanges may be prohibited from functioning in some nations. A total ban on cryptocurrency, however, would never be enforceable. Decentralized exchanges are outside the purview of any authority or organisation. Communities of developers and crypto enthusiasts are responsible for them. As a result, even if all cryptocurrencies were outlawed for use in transactions, Patel continued, “it would not be viable to outlaw crypto completely.
Although the central government hasn’t yet specified what exactly qualifies as “private” cryptocurrency, Bitcoin, Ethereum, and other tokens of this type won’t be outlawed since they are built on public blockchain networks and allow for transaction tracing while maintaining some level of user anonymity.
On the other side, private cryptocurrencies like Monero, Dash, and the like are based on public blockchains but hide transaction data to provide users with privacy. Monero is a private token and offers privacy in contrast to Bitcoin’s anonymity.
It could be challenging to outlaw the tokens because, in essence, a cryptocurrency has no intrinsic worth or liquidity. The tokens might be referred to as assets, commodities, money, or security. Theoretically, if millions of individuals agree to use such money as a means of trade, it will gain value. Such currencies are just bits of code that cannot be “banned.”
A governmental prohibition might not prevent people from sending bitcoins to one another since moving cryptocurrency from one wallet to another is roughly the same as moving data from one computer to another.
Governments may always find methods to obstruct these digital tokens’ entrance and transactions. A significant portion of popular cryptocurrency users who may not have yet dived into the technical side of generating crypto wallets and other related tasks would undoubtedly be lost if these platforms were banned because most investors trade on them.
A general prohibition would make crypto exchanges in India cease operations. When China placed a blanket ban on cryptocurrencies earlier this year in September, one of the biggest cryptocurrency exchanges in the world, Huobi, was forced to follow suit. On November 8, the exchange’s founder informed the Financial Times that it would get no money from Chinese users over the three months from September to December.
According to a policy analyst familiar with government developments, there are “two factions” inside the government: one wants to regulate cryptocurrencies, and the other wants to outlaw them. The individual was cited as stating, “But since the regulatory scenario wasn’t clear, the first group is the one that’s coming out on top.” “If the government passes a money law, it will be resolved in 14 days. Or, they could create an ordinance instead, which would be quicker.
The CEO of WazirX, India’s largest cryptocurrency trading platform, Nischal Shetty, tweeted in the meantime: “The crypto regulatory bill Billbeen nominated for the winter session. The summary hasn’t altered all that much. Both sides will make speculative claims. The good news is that more government employees know how cryptography operates.
The value of Bitcoin, the largest cryptocurrency in the world, reached a record high of $60,000 on Saturday, nearly doubling over this year as more people have begun using it to make payments thanks to prominent supporters like Elon Musk, CEO of Tesla Inc.
Despite government threats of a ban, transaction volumes are increasing in India, where estimates from the industry show that 8 million investors now have 100 billion rupees ($1.4 billion) invested in cryptocurrencies. No verified information is offered.
Sumedh Salodkar, a cryptocurrency investor, said: “The money is multiplying rapidly every month and you don’t want to be sitting on the sidelines.” “Greed is driving these choices, despite the fact that people are panicking over the possible ban.”
According to the chief executive of the local cryptocurrency exchange Bitbns, Gaurav Dahake, user registrations, and cash inflows have increased thirty-fold from a year ago. Despite fears of a ban, Unocoin, one of India’s oldest exchanges, added 20,000 users in January and February.
According to Vikram Rangala, the exchange’s chief marketing officer, ZebPay “did as much volume per day in February 2021 as we did in all of February 2020.”
High-ranking Indian government officials have referred to cryptocurrencies as “Ponzi schemes,” but this month, Finance Minister Nirmala Sitharaman allayed some investor worries.
She told CNBC-TV18, “I can only give you this hint that we are not closing our minds; we are looking at how experiments can happen in the digital world and cryptocurrency. “A very calculated position will be adopted.”
According to the senior official who spoke to Reuters, the plan is to outlaw private crypto assets while promoting blockchain. According to experts, this secure database technology serves as the foundation for virtual currencies and has the potential to revolutionize global trade.
Technology is not a problem for us. The official stated that there was no harm in utilizing technology and that the government’s actions would be “calibrated” regarding the severity of the fines imposed on those who failed to liquidate their crypto assets within the legal grace period.
According to various reports, there are between 15 million and 20 million cryptocurrency investors in India, with total crypto holdings of about Rs 40,000 crore ($5.39 billion).
Investors would only have two choices if the Centre decided to outlaw cryptocurrency: sell their assets or store them in wallets from foreign exchanges.
Self-custody wallets, digital gadgets that function like micro SD cards, would be a wise choice for people who want to hold on to their digital coins despite a ban. These self-custody wallets, including Ledger, Trezor, SafePal, and BitLox, keep the owner’s Bitcoin keys in their possession. These wallets can be sent to friends or family members abroad if they are concerned about keeping them in India in case of a ban.
Furthermore, it is understood that if the government decides to outlaw cryptocurrencies, investors would still have three to six months to dispose of their investments.
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