Govt to ban all private cryptocurrency; RBI to launch official digital currency

The schedule for the budget session shows that ‘The Cryptocurrency and Regulation of Official Digital Currency Bill 2021’ is slated for introduction, consideration and passing.

New Delhi: Days after the Reserve Bank of India (RBI) said it was examining a need to introduce central bank digital currency (CBDC) in the country, reports said that the central government is likely to introduce a bill that prohibits all private cryptocurrencies to provide for an official digital currency.

The bill will be considered to be introduced in the Budget session that will begin from February 1. The schedule for the session shows that ‘The Cryptocurrency and Regulation of Official Digital Currency Bill 2021’ is slated for introduction, consideration and passing, a report by Bloomberg said.

The purpose of the law is to create a facilitative framework for an official digital currency issued by the RBI and to “prohibit all private cryptocurrencies in India”. But, certain exceptions will be permitted “to promote the underlying technology of cryptocurrency and its uses,” the Lok Sabha Bulletin said.

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This development comes against the backdrop of private digital currencies, virtual currencies, and cryptocurrencies gaining popularity in recent years. In 2018, the central bank had effectively banned crypto transactions after a string of frauds in the months following the government’s sudden decision of demonetization, which led to the de-circulation of 80 per cent of the nation’s currency.

Then, RBI had asked all regulated entities, such as banks, to stop any dealings related to private cryptocurrencies as part of that order. This brought cryptocurrency trading in India to a halt. However, the Supreme Court ruled against this order in March last year, noting that the RBI has failed to show “at least some semblance of any damage suffered by its regulated entities’’ to back its decision to effectively bar crytocurrencies in India.”

With the rising rally of Bitcoin’s value, the growth of cryptocurrencies further expanded in India. Indian lenders like State Bank of India, ICICI Bank, HDFC Bank and Yes Bank too have given legitimacy to cryptocurrency through some of their decisions. For example, these Indian banks reportedly have allowed their customers to use their bank accounts to fund cryptocurrency trading.

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