Entrepreneurs are crying foul calling the government's proposal to ban cryptocurrencies in India arbitrary. Instead, the industry is asking for proper regulation by government authorities which can boost a common man's trust in the digital currency.
The government is expected to introduce a bill to ban the trading in cryptocurrencies in India and also put in place the framework for an official digital currency to be issued by the Reserve Bank of India (RBI).
While there will be some exceptions, the move is still expected to end ambiguity on cryptocurrency which is neither banned nor legalised in India.
"This is quite an emerging space. People really like it, not just in India but across the globe. The phenomena which is backing cryptocurrency, which is blockchain technology, is in itself the future of finance. If you just eliminate this product of blockchain technology then you are putting a dead-end to an innovation. Tomorrow no one would innovate in India. They'll have to think what if the government comes and bans it right away," said Shivam Thakral, chief executive officer and co-founder of BuyUcoin. According to him, the government should instead set up a regulatory framework so that people have the comfort of trading with these companies.
A Lok Sabha bulletin has stated that the Regulation of Official Digital Currency Bill, 2021 is likely to be introduced in the Budget Session of Parliament.
The bill, if passed, will prohibit the use of cryptocurrency as legal tender and currency. Additionally, cryptocurrency will be kept out of the payments system.
"I am hoping that the government says, instead of taking an approach of banning it, let me regulate it. The fact that the government is going to debate banning is worrying. Some parts of cryptocurrency are not understood, so you regulate that. For instance, if a company wants to avoid an IPO and go for an ICO, regulate that. The wording of the Lok Sabha proposal seems different from the 2019 proposed bill. Now they say that private cryptocurrency could be banned but there could be exceptions," said Ajeet Khurana, former CEO of Zebpay.
Earlier Clause 26(A) and B of the proposal said if you possess cryptocurrency the government will mandate a way to dispose of it off. But currently, it is unclear whether there will be a one-time opportunity to sell it, or you will have to surrender it. This bill also has enabling provision for a central banker. They may want to ban private cryptocurrency with exceptions created.
Following the Lok Sabha note, the industry is in a state of shock, given that there hasn't been any recent consultation. The last discussion on the issue happened 2-3 years ago.
"Whatever we are discussing is about the bill which was written in 2018 and it has been three years or so. A lot of information which would have gotten outdated because this is a very fast-moving industry by itself. Eventually, it would be very unfair to just apply the 2018 suggestions as a part of the bill. The right way would be to have a committee to come up with new suggestions depending upon how it has come up in the rest of the world," said Sathvik Vishwanath, CEO and co-founder of Unocoin.
As of now, the Centre is expected to name the RBI as the regulator and Enforcement Directorate as the investigating authority for offences under the cryptocurrency bill.
Citing that the government lacked technical knowledge on the issue, Nischal Shetty, co-founder of WazirX, said the current proposal looked way better than the 2019 ban.
“In the crypto world there is nothing called a private cryptocurrency. This shows the lack of technical knowledge at the government level. To use a term that doesn't exist in the industry,” he said.
In 2019 Shetty had an online debate with former finance secretary Subhash Chandra Garg. "And Garg said their worry is about payments. They don't want bitcoin to replace the Indian rupee. And that's fine. They want to eliminate the threat to INR," he pointed out.
“Nobody in India is fighting for bitcoin as a payment mechanism, but can be used for remittances. I don't see why the government would want to back the US dollar as opposed to a decentralised currency like bitcoin. But I see this as a very positive step. Now we have a conversation going on. We can talk about what's right and wrong in the bill so the government gets feedback. Three months back, we had no idea what the government was thinking and did not know how to approach them,” Shetty added.