India to ban private cryptocurrency, create official version instead

Description of new 'Official Digital Currency Bill' appears to allow general use of blockchain

India’s government appears set to ban private cryptocurrencies.

News of the ban emerged in a Bulletin [PDF] that lists bills to be debated in the winter session of the Lok Sabha, India’s Parliament, which resumes for its winter sittings next week.

The tenth bill on the list is titled “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”. While the legislation itself has not been revealed, the Bulletin describes the Bill’s purpose as follows:

To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India; however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.

In July 2021, the deputy governor of India’s Reserve Bank suggested central bank digital currencies have enormous potential and India can’t afford to be left behind. The Bill suggests that argument has been accepted by India’s government, which has decided to develop the regulations for a CBDC.

The precise meaning of “prohibit all private cryptocurrencies” has not been explained. The Register has encountered opinions suggesting so many Indian citizens have invested in cryptocurrency as an asset that an outright ban would spark a backlash. Bans on using cryptocurrency as a means of exchange have therefore been suggested, a proposal that chimes with the Indian government’s attempts to broaden its tax base.

The last part of the description suggests Indian law will allow use of blockchain – just not for cryptocurrency.

India is one of many nations that have started work on a CBDC: the UK, Japan, Canada, and Hong Kong have all begun work.

The USA has begun work, too, and on Tuesday took another step towards making crypto mainstream when the nation’s Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency issued a joint statement [PDF] that revealed the agencies have already conducted a series of policy development “sprints”. The three organisations stated that in 2022 they “plan to provide greater clarity on whether certain activities related to crypto-assets conducted by banking organizations are legally permissible, and expectations for safety and soundness, consumer protection, and compliance with existing laws and regulations.”

China, meanwhile, has already issued its Digital Yuan and claims 140 million wallets have been used at least once. The Middle Kingdom has also banned cryptocurrency mining and never authorised its use. ®