Against widespread expectations, the government has not listed the much-awaited Cryptocurrency Bill in the upcoming Monsoon Session of Parliament, which commences on July 19.
Officials declined to comment as to whether the bill will be tabled later in the Winter Session this year or even beyond that.
Moneycontrol has learnt from multiple sources that there are two reasons for the bill not being tabled now.
Further deliberations needed
First, while a draft bill is ready, further deliberations are still being held between the Finance Ministry, Reserve Bank of India (RBI), banks and other stakeholders. The government wants to take a considered decision on cryptocurrency. It is understood that while there will be no outright ban on cryptocurrencies, they won’t be allowed as legal tender either. Rather, cryptocurrencies are likely to be treated as a tradeable asset class with a market, ‘like commodities or art,’ as per sources.
The second, and more important reason, as far as the government is concerned, is that regulation of cryptocurrencies is not that high on the Centre’s economic agenda right now. Policymakers believe that while there are substantial investments in cryptocurrency and the market will only continue to grow, its impact on the real economy is minimal right now.
“There are only so many bills and amendments one can push through in a session of Parliament, including the ones pending from the Budget Session.
The cryptocurrency market’s impact on the real economy currently is not that much,” a top government official told Moneycontrol.
Ban unlikely, but not a currency either
Two other officials privy to deliberations within the government said that the Centre does want to take a considered, holistic view on cryptocurrencies before introducing a bill in Parliament.
“A draft bill is ready, but further deliberations are ongoing,” said one of the officials. It is understood that the RBI still wants an outright ban while the thinking in some sections of the government is that it can be allowed as an asset class, which can be traded and in which a person can invest, all under regulations. There are concerns within the government on the ‘relative volatility’ of cryptocurrencies.”
However, the consensus view seems to be that cryptocurrencies will not be allowed as money or legal tender. “A currency is one which has sovereign backing. Money is money because it derives its value from a sovereign fiat,” said the official.
This means that if the authorities do finally decide to not consider Bitcoin, Etherium and others as legal currency, an exchange of cryptocurrency for goods and services will be seen as a barter between two parties rather than a transaction which comes with the legal backing that a sovereign currency provides.
1.5 crore Indians have invested in cryptocurrencies
According to data from crypto exchanges, there are approximately 1.5 crore Indians who have invested in cryptocurrencies, holding worth Rs 15,000 crore, with more and more people starting to invest. There are 350 startups which operate in the blockchain and crypto space.
In March 2020, the Supreme Court quashed a 2018 rule banning crypto trading by banking entities, resulting in a trading surge and the rise of exchanges. However, the RBI has maintained that it has “major concerns" about the asset class. It has issued an informal diktat to banks to stop handling crypto trades and investors are said to be approaching the apex court again.
Other economic bills take precedence
For now, the Narendra Modi government’s legislative priorities lie elsewhere. Some of the economic bills and amendments that are expected to be tabled include the Factoring Regulation Amendment Bill, the amendments to the Insolvency and Bankruptcy Code (IBC), the Coal Bearing Areas (Acquisition and Development) Amendment Bill, and amendments to the law governing chartered accountants and company secretaries.
There will also be amendments to the Pension Fund Regulatory and Development Authority (PFRDA) Act and the Deposit Insurance and Credit Guarantee Corporation (DICGC) Amendment Bill, plus the Electricity Amendment Bill.
The Factoring Amendment Bill was tabled in September 2020, but was referred to the Standing Committee on Finance for further consideration. The bill was introduced to monitor ‘factoring’, which are transactions wherein a business entity transfers its receivables from a customer to a third party to enable realisation of funds.
The amendments to the IBC are being brought in to help companies hit by COVID-19. It will enable speedier, cost-effective, semi-formal and less-disruptive framework for insolvency resolution.
The Chartered Accountants, Cost and Works Accountants, and Company Secretaries (Amendment) Bill is being introduced to reform and speed up the disciplinary mechanism of institutes like ICAI, ICSI and others.
Amendments will be introduced to the PFRDA Act to fulfil an older budget announcement of separating the National Pension System from the PFRDA, and providing universal pension coverage. The DICGC (Amendment) Bill will enable easy access to depositors in a time-bound manner in case of suspension of operations in any bank.The laws governing the power and coal sectors are being amended to ensure greater competition, transparency and private-sector participation.