India to have its official digital currency, a proposed law to ban cryptocurrencies in-country

Last updated on February 16th, 2021 at 07:07 am

The Indian government is planning to introduce a law that would ban the use of private cryptocurrencies in the country like Bitcoin, ether, and ripple. In place of that, an official digital currency would be issued by the Central Bank of India. 

As per the legislative agenda published on the website of the Lower House on January 29, the law would “create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India (RBI).” 

The legislation is set for debate in the ongoing parliamentary session, Budget session of 17^th Lok Sabha, and would seek “to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”

A panel by the government had recommended in mid of 2019 banning of all private cryptocurrencies. In case of non-compliance, 10 years of jail term along with heavy fines would be imposed on people. The panel further advised the launch of an official digital currency that would function like banknotes and would be issued by RBI. 

In April 2018, RBI had ordered all financial entities to break dealings with businesses or individuals that are linked to cryptocurrency within three months. But in March 2020, Supreme Court allowed banks permitted banks to handle transactions in cryptocurrency from traders and exchanges. 

Rahul Pagidipati, CEO at ZebPay said, “We’re proud that the RBI is exploring a digital rupee built on a blockchain. Blockchain technology not only lowers costs but also improves accounting since it is an immutable ledger, which would give the government new tools to fight corruption. However, creating a government currency doesn’t require the banning of non-government crypto assets. On the contrary, safely including all aspects of this new technology will bring tremendous tax revenue and innovation.”

Regulating cryptocurrencies has been a prime agenda for major economies across the world, but placing a ban on owning them is a drastic step taken by India. Experts raise concern over possible misuse of consumer data and future impact on the financial framework.