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It's been a few angsty days for India's crypto owners as the government indicated its plans to introduce a bill in the upcoming winter session of the Parliament to regulate all private crypto currencies.
The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 seeks “to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India," the government notification says.
The bill also intends to "prohibit all private cryptocurrencies in India" with "certain exceptions to promote the underlying technology of cryptocurrency and its uses".
India's crypto market has been swarming with a lot of young investors with numerous ads promising easy returns.
In fact, the country has become one of the world's largest crypto markets with at least 10 crore cryptocurrency investors investing over $10 billion dollars, according to crypto research and intelligence business CREBACO.
While the bill says it would prohibit all "private cryptocurrencies", it doesn't go onto defining what that entails exactly.
One definition of "private cryptocurrencies" mean those which allow one to hide the transactional details from the public.
The two most highly-valued cryptocurrencies – Bitcoin and Ethereum among others, for instance – are based on public blockchain networks, which could make transactions traceable while still providing some amount of anonymity to users.
On the other hand, there are several others cryptocurrencies that conceal the transactional details to offer a tighter privacy.
With uncertainty looming large, a wave of investors trading in cryptocurrencies has been rushing to panic-sell their investments, leading to WazirX, India's biggest cryptocurrency exchange crashing for a few hours.
Currently, India doesn't have any regulations or bans on crypto trading but it's had a rather impetuous relationship with it.
A Reserve Bank of India (RBI) circular from April 2018 had also advised against dealing with virtual currencies, until it was set aside by the Supreme Court in 2020.
Then later on in 2021, Finance Minister Nirmala Sitharaman had indicated a "calibrated" stance, saying, "We want to make sure there is a window available for all kinds of experiments which will have to take place in the crypto world."
Given this teetering stance, what kind of outcome is expected from the bill?
"Considering the kind of interest or fascination it has acquired among the younger generation, it is clear that a considerable number of Indians have invested. But the consequences of this move would depend on what exactly the bill intends to do," says Mr Subhash Chandra Garg who headed the Garg Committee which had recommended a ban on virtual currencies in its 2019 report.
"What the bill which was prepared by the committee that I headed in 2019 proposed, is very clear. But what the government is preparing to introduce in Parliament now is as cryptic as cryptocurrencies," he adds.
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