Cryptocurrencies may not be completely banned in India and the government may create a framework to regulate highly risky virtual assets, as per multiple reports. The development comes at a crucial time as the government’s upcoming cryptocurrency bill has spooked investors and other stakeholders.
Under the proposed legislation, cryptocurrencies could be renamed as crypto-assets, which would be regulated by the Securities and Exchange Board of India (Sebi), reported livemint.com after speaking with two people familiar with the plan.
Though the government is yet to officially disclose its plans for cryptocurrency assets, the latest reports suggest that a complete ban will not be enforced like in China.
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A few days ago, Finance Minister Nirmala Sitharaman shared a crucial update on the government’s cryptocurrency bill, indicating that the new bill has been reworked and that it may not be aimed at a complete ban.
She clarified that the initial description of the cryptocurrency bill, listed as part of the Lok Sabha agency, was old and does not define the new bill that is still awaiting approval from the cabinet. The new bill will be introduced as soon as it gets approval from the cabinet.
The initial description of the cryptocurrency bill triggered panic among cryptocurrency investors and stakeholders last week. It also led to a sharp crash on domestic cryptocurrency exchanges, crippling valuations of top virtual coins like Bitcoin, Ethereum and Tether.
BILL TO CLASSIFY CRYTO AS ASSETS
One of the two people quoted in the livemint.com report indicated that the government’s bill is aimed at categorising crypto as an asset as it will ensure it does not overlap with the digital currency to be launched by the Reserve Bank of India (RBI).
Moreover, all cryptocurrency exchanges are likely to be regulated by Sebi and violations could lead to monetary penalties ranging from Rs 5 crore to Rs 20 crore, and even imprisonment.
Another person quoted in the report said the government is likely to introduce the bill in Parliament in the third week of the ongoing Winter Session. The aim of the bill is to categorise cryptos to separate them from the RBI’s digital currency, besides regulating it.
What this essentially means is that all cryptocurrency transactions will be conducted through Sebi-registered platforms and exchanges to limit the scope of serious fraud, scams and irregularities. Crypto exchanges will have a deadline to get registered with Sebi in order to operate smoothly.
If the government’s cryptocurrency bill is indeed aimed at regulating the virtual asset, it will be a big relief to India’s growing cryptocurrency ecosystem and retail investors. There has been a sharp rise in the number of cryptocurrency investors in India since 2020.
Many experts tracking the cryptocurrency market and some reputed think tanks have suggested that regulating the asset is in the interest of consumers and will promote innovation. Besides, regulating the assets will also cut off the growth of unorganized crypto trade.
Despite challenges in regulating risky assets, experts believe that a balanced regulatory approach would help the country keep up with emerging global trends.
On the other hand, there are several financial experts who believe that banning cryptos is the correct move as they have no underlying value. As the situation stands, the future of cryptos ultimately depends on what the government has proposed in its upcoming bill.