“The bill seeks to prohibit all private cryptocurrencies in India. However, it would allow certain exceptions to promote the underlying technology of cryptocurrency and its uses,” the government said in its remarks on the bill.
The language of the government’s description of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, made crypto experts uneasy.
“There’s no such thing as a ‘private cryptocurrency’. Cryptos, by their very nature, are decentralised and public,” Nischal Shetty, founder of one of India’s largest cryptocurrency exchanges Wazir X, said in a tweet late Friday.
Industry watchers said the government’s definition of ‘private’ could imply that any digital currency that is not sovereign could be seen as a ‘private’ currency, including Bitcoin.
“This is (the) time to be nervous,” an official at another large cryptocurrency exchange said on the condition of anonymity.
The government’s relationship with the cryptocurrency sector has been one of wariness ever since the digital currency gained popularity in the country back in 2017. In 2018, RBI decided to ban the use of banking channels to buy or sell cryptocurrencies, as it was concerned over its use for terror financing, money laundering and other outlawed activities.
Indian investors’ interest in Bitcoin and other cryptocurrencies revived after the Supreme Court in March 2020 lifted the RBI ban, giving cryptocurrencies a second chance in India.
Cryptocurrency exchanges such as Wazir X, Unocoin and ZebPay have since seen a sharp increase in user registration and trading volumes. Wazir X recently clocked 1 million new users on its platform, reflecting rising awareness and interest among Indians.
Much of the interest in Bitcoin and other cryptocurrencies has been driven by their stellar price performance over the past 10 months, while others have been enamoured by the technology’s long-term potential. Bitcoin’s price has risen more than 700 per cent since April, while other alternative coins such as Ethereums have seen even stellar gains.
Globally, the surge in Bitcoin and its usage lately has been driven by increasing interest from institutional investors and platforms like PayPal and Square. This is unlike the retail investor-driven frenzy of 2017-18.
“There is lot of positivity around crypto now and I hope this (bill) will not get passed as it is for now,” the top industry executive quoted above said.
However, there are concerns over the use of cryptocurrencies for nefarious means, and it is something that has governments worried across the world.
On Thursday, famed investor Ray Dalio cautioned investors in a note that it would be foolish to assume that governments will stand by and let cryptocurrencies gain prominence over their fiat money.
“Rather than it being far-fetched that the government would invade the privacy and/or prevent the use of Bitcoin (and its competitors), it seems to me that the more successful it is, the more likely these possibilities would be,” Dalio wrote in his note.
The bill drafted by the Indian government is yet to be released. Clarity will emerge on the nature of and the extent to which the government will regulate other cryptocurrencies in India, only when it is made public.
Till then it is going to be an anxiety-filled wait for the cryptocurrency industry and investors in India.