Prime Minister Narendra Modi said on Friday that emerging technologies, such as cryptocurrencies, should be used to empower democracy, not undermine it. Modi is expected to take the final decision on regulations for cryptocurrencies, according to reports. There is still dispute about the impact of unregulated digital currency transactions on macroeconomic and financial stability as policymakers remain adamant.
The options include a complete ban on private cryptocurrencies, a partial ban, allowing all categories of crypto products with regulation, or just a select few with regulation, one of the persons said. Deliberations are likely to continue on Friday before a decision on the framework is taken, the second person said.
During the ongoing winter session of Parliament, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is scheduled for consideration and passage.
PM called for united efforts to shape global norms for emerging technologies like social media and cryptocurrencies so that they are used to “empower democracy, not to undermine it”. He called upon democratic nations to work together to prevent cryptocurrency from ending up in the wrong hands in his virtual address at the Sydney Dialogue on November 18.
The government initially planned to ban all private cryptocurrencies but announced that it now plans to establish a regulatory framework as part of a new crypto bill that will be introduced in the winter session.
In India, however, crypto will not be recognized as currency or legal tender. The word “cryptocurrency” has been replaced with “crypto-asset” in the legislation. By separating the formal financial sector from crypto assets, the bill also seeks to minimize the risk of financial instability.
As part of the bill, a facilitative framework is proposed for “distributed ledger technology” and the Reserve Bank of India (RBI) is asked to issue an official digital currency (digital rupee) which is to be regulated by the RBI Act.
If these assets are found to be used for terror-related activities, the provisions of the Prevention of Money Laundering Act (PMLA) will apply with appropriate amendments. In the crypto bill, the government is empowered to exempt certain activities in the public interest, such as crypto mining, generating holdings, selling dealing in issue transfers, disposing of it or uniting it as a medium of exchange, store of value, and unit of account.
An outline of the proposed bill has been finalized by the finance ministry, but sections within the government felt it was necessary to discuss more extensively the principles underlying it and the details of India’s treatment of virtual currencies, the person said.
There will be discussions about various options and the pros and cons of adopting them. “The PM will now make a final decision on these,” the person said.
The proposed Bill also creates a framework for the creation of an official digital currency backed by the Reserve Bank. Private cryptocurrencies will be banned in India, but some exceptions will be allowed to promote the technology behind them. Nirmala Sitharaman, the finance minister, stated last week that the government will bring the bill before Parliament after the Cabinet clears it.
