The Centre has proposed to table a Bill on cryptocurrency in the Winter Session of Parliament that begins on November 29 to facilitate the creation of an official digital currency by the Reserve Bank of India (RBI). The bill seeks to ban all cryptocurrencies, except a few, and introduce a system to regulate crypto transactions in India. However, following the government’s proposal, the values of major digital currencies dropped significantly, with Bitcoin and Tether losing the most.
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WHAT IS CRYPTOCURRENCY?
Cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Most cryptocurrencies are on decentralized networks based on blockchain technology — a distributed ledger enforced by a disparate network of computers.
CRYPTOCURRENCY IN INDIA: 10 POINTS
1) The Government of India has sought to table the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, at the winter session of Parliament to regulate the cryptocurrency framework in India.
2) The RBI is likely to introduce an official form of cryptocurrency. All private cryptocurrencies, barring a few exceptions, will be banned in India if the bill is passed in its current form.
3) As news of the ban got out, the values of major cryptocurrencies fell. Bitcoin fell by 18.53%, Tether fell by 18.29% and Ethereum fell by 15.58% on Tuesday. According to CoinDesk, most cryptocurrencies remained in the red on Wednesday as well.
4) The government’s decision to table the bill came after Members of Parliament came to the conclusion at a panel meeting on November 15 that cryptocurrencies cannot be stopped and, hence, must be regulated. While flagging full-page crypto advertisements in national dailies, MPs said that the security of investors’ money is the most serious concern for all members.
5) The RBI has been voicing its serious concerns about cryptocurrencies since 2017. An RBI circular of April 6, 2018, prohibited banks and entities regulated by it from providing services in relation to virtual currencies. On March 4, 2021, the Supreme Court, however, set aside the circular.
6) At a recent event, RBI Governor Shaktikanta Das said that there was still a lack of serious and well-informed discussions over cryptocurrencies in public space.
7) The SC Garg Committee had concluded that cryptocurrencies cannot serve the purpose of a fiat currency because private cryptocurrencies are inconsistent with the essential functions of money/currency.
8) Indian crypto exchanges and industry bodies recently published a joint advertisement, claiming that crypto investments by Indians have crossed Rs 6 lakh crore and the number of investors had grown exponentially to over 10 crores.
9) Addressing the Sydney dialogue on November 18, Prime Minister Narendra Modi had said that all countries must ensure that cryptocurrencies do not “end up in the wrong hands”.
10) At present, El Salvador is the only country to have given cryptocurrency the status of a legal tender.