The government is considering a law to ban virtual currency while confusion about the status of cryptocurrency in the country continues to be unclear
In a major blow to crypto investors in India, the country is considering a ban on cryptocurrencies again The Economic Times reported. After a circular by the Reserve Bank of India was overruled by the Supreme Court in March, the government is now devising a legal framework to put the ban into effect.
The ET quoted a senior official claiming that “A note has been moved (by the finance ministry) for inter-ministerial consultations.” After receiving the cabinet’s approval, a draft of the bill will be moved to parliament. A bill must then achieve a majority in both houses of parliament and then receive the president’s approval to become a law.
The RBI had issued a directory in April 2017 where it prohibited any entity regulated by the reserve bank from “providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to the purchase or sale of virtual currencies”. However, the Supreme Court lifted the de facto ban in March 2020 stating that the “…RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none.”
A government panel of senior officials, headed by former Finance secretary Subhash Garg, prepared a draft law to ban all forms of cryptocurrency holding in July last year. The draft stipulated that direct or indirect trading of cryptocurrencies in the country will be punishable with a fine, imprisonment or both. If the present proposal is on similar lines as the 2019 draft law, it will be a big blow to investors, exchanges and other entities dealing with virtual currencies in India.
Although the Supreme Court’s decision to lift the ban in March prompted some startups to revive plans and encouraged crypto investment in India — crypto didn’t take off as much as some had expected. Several banks still don’t allow payments involving cryptocurrency due to a lack of clear communication from the Reserve.
The draft law made it “illegal to hold, sell, issue, transfer, mine or use cryptocurrencies and, if passed in the current form, would completely decimate the crypto-industry in India,” said Amit Maheshwari, partner, AKM Global. The government must involve stakeholders from the industry to be able to make a well-informed decision, he added.