The Crypto Currency and Regulation of Official Digital Currency Bill, 2021

Written By: Sreshta Satpathy

Overview

A total of 26 new laws, including one on cryptocurrencies, have been scheduled for introduction in the Parliament’s Winter Session, which will begin on November 29 and end on December 23. The cryptocurrencies and regulation of digital currency bill, banking amendment bill, repeal of farm legislation, IBC amendment bill, and stated the legislative age will all be discussed during the Winter Session. Among the bills proposed is one that would overturn three contentious farm laws. The legislation will be repealed by the Centre during the Winter Session of Parliament, according to Prime Minister Narendra Modi. To obtain an agreement on the bill, the central government has been collaborating with the opposition.

The Banking Laws (Amendment) Bill, 2021, is one of the 26 bills, and it aims to amend the Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980, as well as incidental amendments to the Banking Regulation Act, 1949, in light of the Union Budget announcement in 2021 regarding the privatization of two public sector banks. The Farm Laws Repeal Bill, 2021, will be the most significant of the 26 bills, as it will repeal the three farm laws proposed by the Centre last year. The Data Protection Bill and the Pension Fund Regulatory and Development Authority (Amendment) Bill, both due to be introduced in Parliament in 2021, are also on the agenda. The pension bill aims to amend the Pension Fund Regulatory and Development Authority (PFRDA) Act in order to comply with the 2019 Budget Announcement regarding the separation of the National Pension System Trust from the Pension Fund Regulatory and Development Authority, as well as to comply with last year’s Budget Announcement for universal pension coverage and strengthening the PFRDA.

About the bill

The Crypto Currency and Regulation of Official Digital Currency Bill, 2021, which will be introduced in Parliament during the Winter Session, aims to establish a framework for the regulation of official digital currencies “to establish a framework that will make it easier for the Reserve Bank of India to create an official digital currency. The Bill also aims to outlaw all private cryptocurrencies in India, but it makes some exclusion in order to encourage crypto currency’s core technology and applications.” The cryptocurrency bill is being introduced in response to concerns that such currencies are being used to deceive investors with false claims.

On November 18, the administration gave the first hint that it was working to correct the situation with cryptocurrency safety. Prime Minister Narendra Modi remarked at the Sydney Dialogue, a summit on emerging, crucial, and cyber technologies, “Take, for example, cryptocurrency or Bitcoin. It is critical that all democratic nations collaborate on this to guarantee that it does not fall into the wrong hands, endangering our youth.” Despite its volatility and hazards, the popularity of cryptocurrency has shown that it may be used by governments as a source of revenue. The earnings could also indicate that services offered by digital currency operators will be subject to direct tax and GST. It has the potential to create jobs as well. The Reserve Bank of India (RBI) has been concerned about cryptocurrency since 2017. During a parliamentary hearing in July 2017, then-RBI governor Urijit Patel stated that the central bank was actively monitoring cryptocurrency transactions. Members of the panel, including BJP MP Nishikant Dubey and BJD’s Bhartrihari Mahtab, have previously remarked that the rise in the use of virtual currencies is alarming due to the difficulty in determining the source of funding. The Reserve Bank of India (RBI) has formed an inter-disciplinary group to discuss the legality of cryptocurrency.

The first-ever Parliamentary panel discussion on cryptocurrencies was placed, with the conclusion that cryptocurrency cannot be banned, but must be regulated. Jayant Sinha, the BJP’s finance spokesman, presided over a meeting of the standing committee on finance on November 16, which featured representatives from crypto exchanges, the Blockchain and Crypto Assets Council (BACC), business groups, and other stakeholders. The Reserve Bank of India has been reticent to embrace cryptocurrencies, citing possible dangers to macroeconomic and financial stability as well as capital controls as reasons. The central bank has expressed “severe worries” about private cryptocurrencies and is planning to establish its own digital currency by the end of the year. Bitcoin, the world’s most popular cryptocurrency, is currently trading at approximately $60,000 (around Rs. 44.7 lakh), having more than doubled in value since the beginning of the year, and attracting a flood of local investors. As of 9 a.m. IST on November 24, the price of bitcoin in India was Rs. 35.04 lakh. There is no official data, but industry estimates say that India has 15 million to 20 million crypto investors, with total crypto holdings of roughly Rs. 40,000 crore. The Indian government considered making crypto-asset possession, issue, mining, trading, and transfers illegal, but no legislation was introduced. Since then, the government has softened its attitude and is now attempting to discourage cryptocurrency trade by charging high capital gains and other taxes, according to two individuals who spoke to Reuters this month. However, a senior government official told Reuters that the plan is to eventually ban private crypto assets while paving the way for a new Central Bank Digital Currency (CBDC). According to insiders, Prime Minister Narendra Modi presided over a conference to explore the future of cryptocurrencies, which was held amid worries that unregulated crypto markets could be used for money laundering and terror financing.

Conclusion

Countries are currently split on how to approach cryptocurrency regulation. According to a Fitch Ratings note from October 2021, American corporate and financial institutions’ exposure to cryptocurrencies is expected to grow – several companies, including Tesla, have accepted Bitcoin for payment and plan to do so again if concerns about their environmental impacts are addressed. For India, this is a watershed moment. From a banking prohibition in 2018 to the Winter Session of Parliament listing the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. Our country has come a long way in just three years! It speaks volumes about India’s resolve to dominate the web 3.0 era. While the description of the draught bill appears to have remained unchanged since January 2021, several significant events have occurred since then. Our Prime Minister stepped up to ask for crypto rules in India after the Parliamentary Standing Committee launched a public consultation.

Sreshta Satpathy

Student at Adv. Balasaheb Apte college of Law , Mumbai

I am 20 years old and I belong to Orissa. I’m currently a third-year student pursuing BLS LL.B from Mumbai University. I intend to pursue corporate law in the future.

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