The government is considering legislation to ban virtual currencies. Confusion in India over the status of cryptocurrencies continues
In a major blow to crypto investors, India is once again considering a ban on cryptocurrencies, according to The Economic Times. After a Reserve Bank of India (RBI) circular from March was set aside by the Supreme Court, the government is now preparing a legal framework to attempt to enforce a ban through legislation.
ET quoted a senior official saying that a note from the finance ministry for inter-ministerial consultations has been circulated. Once cabinet approval is obtained, a bill will be submitted to Parliament. The bill must secure majority support in both houses; following parliamentary approval, it requires the president’s assent to become law.
In April 2017 the RBI issued a circular prohibiting entities regulated by the central bank from “providing services in relation to virtual currencies, including transfer or receipt of money into accounts related to the purchase or sale of virtual currencies.” The Supreme Court overturned this de facto ban in March 2020, ruling that the RBI had to demonstrate at least a prima facie case of harm suffered by its regulated entities — a showing the court found was not made.
In July 2019, a high-level government committee chaired by former finance secretary Subhash Garg drafted a bill that would have banned all forms of cryptocurrency. That draft proposed penalties, including fines and/or imprisonment, for direct or indirect trading in cryptocurrencies. If the current proposal resembles the 2019 draft, it would represent a severe setback for investors, exchanges and other companies operating in India’s crypto sector.
Although the Supreme Court decision in March prompted some startups to revive plans and encouraged renewed interest in crypto investment in India, adoption remained weaker than some observers expected. Several banks continue to restrict crypto-related payments, citing the lack of clear guidance from the central bank.
“The bill would make it illegal to hold, sell, spend, transfer, mine or use cryptocurrencies and, if enacted in its present form, would effectively wipe out India’s crypto industry,” said Amit Maheshwari, partner at AKM Global. He added that the government needs to engage industry stakeholders to make informed policy decisions.