Analysis of India’s new cryptocurrency law reveals that the government is not pursuing a blanket prohibition, but rather is establishing a regulated framework.
Recent Indian legislative proposals do not attempt to outright outlaw cryptocurrencies, but rather to establish a regulatory framework for its regulation as a security, while restricting its use as a payment mechanism and instead supporting an Indian Central Bank Digital Currency (CBDC).
The law, named the “Cryptocurrency and Regulation of Official Digital Currency Bill 2021,” is similar to one that was introduced in New Delhi’s Parliament last year.
“This bill enables the allocation of funds for the creation of a fiat cryptocurrency called the digital Rupee and establishes the infrastructure necessary for widespread adoption and usage in the country, similar to China,” Harsh Rajat, Founder of the Ethereum Push Notification Service, explained to Blockworks.
“However, no blanket prohibition on other currencies is envisaged. The Reserve Bank of India wishes for the digital Rupee to play a key role in the Indian economy.”
One difference between this year and last year is that politicians now have a much better understanding of cryptocurrency. Nischal Shetty, CEO of Indian cryptocurrency exchange WazirX, tweeted.
Mikkel Morch, a director at digital asset hedge fund ARK36, stated via email that “an outright prohibition on such investments may be difficult to implement in India, as the digital asset ecosystem extends far beyond cryptocurrencies and includes other investable assets such as NFTs, which are gaining popularity in the country.”
Sino Global Capital noted in a twitter thread that the legislation is imprecise and confusing, making it unclear what the term “private cryptocurrency” — which would be prohibited under one reading of the bill — means.
“There is no universally accepted definition of private cryptocurrency. The measure will need to provide a definition for the same. It might refer to any of the three options or to a whole new meaning,” Sino Global tweeted.
The fund does not believe this includes all blockchain-based digital assets, other than the one developed by the Indian government.
That interpretation is “very improbable in light of the fact that the government realises ordinary investors have spent about $6.6 billion in the industry.” Additionally, the industry employs 50,000 people directly and indirectly,” they stated.
However, the bill’s contents are open to change during the legislative session depending on advice from the parliamentary committee comprised of opposition party members.
“It is also critical to remember that this is the government’s interpretation of what should be the law and is by no means the ultimate form of the legislation. To become legislation, it must be discussed and enacted by the legislature,” they concluded.
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