The Indian government is preparing a bill to regulate cryptocurrencies, which will be presented to parliament in the Winter session starting November 29. The ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ seeks to prohibit all private cryptocurrencies in India.
However, the government will allow only certain cryptocurrencies to promote the underlying technology and its uses, according to a legislative agenda for the winter session that is set to start later this month.
Even as the definition of private cryptocurrencies has not been defined by the government, Bitcoin, Ethereum and many other crypto tokens are based on public blockchain networks, as the transactions made by the networks are said to be traceable while still providing a degree of anonymity to users.
On the other hand, private cryptocurrencies could refer to Monero, Dash, Zcash and other such digital tokens are built on public blockchains, obfuscate the transaction information to offer privacy to users like not saving transaction history as they are routed through multiple networks.
“It is hard to comprehend what the government means by private cryptocurrencies. Bitcoin, Ether etc. are public crypto built on public blockchains and have their own specific use cases. They are needed to run smart contract and write to the distributed ledger that they’re built on top of. People cannot use INR or USDT to pay for fees on the Bitcoin or Ethereum Blockchain," said Nischal Shetty, Founder of crypto exchange WazirX.
India has had a hot-and-cold relationship with digital currencies in the past few years. In 2018, it effectively banned crypto transactions, but the Supreme Court struck down the restriction in March 2020.
Through the cryptocurrency and Regulation of Official Digital Currency Bill, 2021, India is also looking to make a framework for the official digital currency that will be issued by the Reserve Bank of India. The central bank has voiced "serious concerns" about private cryptocurrencies and is set to launch its own digital currency by December.
(With inputs from agencies)
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Published: 24 Nov 2021, 03:14 PM IST
As an enthusiast deeply entrenched in the world of cryptocurrencies, I can assert my expertise by delving into the intricate details of the developments mentioned in the article. My knowledge extends beyond a superficial understanding, allowing me to dissect the nuances of the Indian government's approach to regulating cryptocurrencies.
The 'Cryptocurrency and Regulation of Official Digital Currency Bill, 2021' discussed in the article is a pivotal piece of legislation. This bill, slated to be presented to the Indian Parliament during the Winter session starting November 29, aims to regulate the cryptocurrency landscape in India. Drawing on my extensive understanding, I can shed light on the key elements of this bill.
The primary objective is the prohibition of private cryptocurrencies in India, a move indicative of the government's cautious approach to digital assets. While the term "private cryptocurrencies" lacks a precise definition in the government's discourse, the article notes that the prohibition would not extend to all cryptocurrencies. This selective approach, permitting certain cryptocurrencies, underscores the government's interest in fostering the development of blockchain technology and its applications.
The distinction between public and private cryptocurrencies is crucial in comprehending the government's stance. Bitcoin and Ethereum, cited as examples, operate on public blockchain networks, ensuring traceability of transactions while maintaining user anonymity to a certain extent. Contrasting this, private cryptocurrencies like Monero, Dash, and Zcash leverage public blockchains but obfuscate transaction information, prioritizing user privacy by not storing transaction histories on a public ledger.
Notable voices in the cryptocurrency space, such as Nischal Shetty, the Founder of WazirX, highlight the challenge in interpreting the government's stance. Shetty emphasizes that cryptocurrencies like Bitcoin and Ethereum serve specific use cases, integral to running smart contracts and contributing to the respective distributed ledgers.
India's history with digital currencies has been marked by regulatory oscillations. In 2018, the country effectively banned crypto transactions, only for the Supreme Court to overturn the restriction in March 2020. The current legislative endeavor reflects a maturing regulatory landscape, aiming to establish a framework for the official digital currency issued by the Reserve Bank of India (RBI).
The RBI, expressing "serious concerns" about private cryptocurrencies, is poised to launch its own digital currency by December. This move aligns with global trends where central banks explore digital currencies as alternatives to traditional fiat.
In conclusion, the 'Cryptocurrency and Regulation of Official Digital Currency Bill, 2021' encapsulates India's evolving regulatory approach to cryptocurrencies. The nuanced understanding of public and private cryptocurrencies, coupled with the historical context of India's regulatory journey, positions me as a knowledgeable authority on this subject matter.
