Rbi ban cryptocurrency in india
The digital currency bill, currenly under work, is expected to provide an exit window to existing cryptocurrency investors in the event of an outright ban, according to reports. This exit window, according to a government source, could be a period of about three to six months before a ban on trading in cryptocurrencies is enforced, the Indian Express reported. While The Cryptocurrency and Regulation of Official Digital Currency Bill, , was expected to be discussed in the recent Parliament Budget session, the government said it is continuing its discussions with stakeholders to incorporate their perspectives on the proposed law. According to government sources quoted by The Indian Express , officials and ministers in decision making roles are of the view that private cryptocurrencies do more harm than good to the financial system and currency holders, and prefer a government backed version that is free from volatility and fluctuations seen in currencies like Bitcoin. The Indian government had already sought to bring cryptocurrency transactions under their control.
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- Cyptocurrency not banned in India, RBI says in Supreme Court
- India announces bill to ban private cryptocurrencies
- RBI Favours Complete Ban On Crypto; It Is A Serious Concern To RBI, Says Governor
- Why the Supreme Court set aside RBI's ban on cryptocurrency trading
- In favour of complete ban on cryptos: RBI to Central Board
- Indian crypto sector expects some clear regulations for the industry in the upcoming budget.
- India's top court strikes down RBI banking ban on cryptocurrency
Cyptocurrency not banned in India, RBI says in Supreme Court
Highlights of the Bill. Key Issues and Analysis. Cryptocurrency emerged as a person-to-person electronic cash system that allows online payments to be sent directly from one party to another, without the need of a financial institution. This makes the issued currency a legal tender. Most cryptocurrencies are not backed by a sovereign guarantee, and therefore are not considered as legal tender.
For a legal tender, transaction data is usually maintained centrally with financial institutions like banks. In contrast, cryptocurrency transactions are recorded and shared with all users on the network.
Cryptocurrencies are used for payment if the receiver is willing to accept it. Since their values fluctuate in relation to other currencies such as the US Dollar, they are also traded.
As of October , there were more than 3, cryptocurrencies across the world, with daily global trading volume of around USD 50 billion. Over the years, several risks related to cryptocurrencies have emerged such as potential use for illicit activities, and lack of consumer protection. Countries have adopted different frameworks to regulate cryptocurrencies. Several countries such as Japan, Canada, Switzerland regulate cryptocurrencies under their anti-money laundering provisions.
Other countries such as China, Saudi Arabia have prohibited their use as a currency. Between and , the Reserve Bank of India RBI and the Ministry of Finance issued several advisories against the potential financial, customer protection and security risks pertaining to cryptocurrencies. It highlighted several risks associated with cryptocurrencies such as high volatility in price, vulnerability to money laundering and financial stability risks. It also proposed a draft Bill to ban cryptocurrencies in the country and provide for an official digital currency.
Key Features. Regulation of cryptocurrency. Offences and Penalties. Rationale for the draft Bill. Working of cryptocurrencies. Money has three main attributes: it is used as a unit of account, as a medium of exchange, and as a store of value. In most countries, money is issued by a government backed authority such as RBI in India and carries sovereign guarantee.
Entities authorised to hold money and enable payments such as banks, credit cards and payment wallets are licensed by a government agency. This means that there is a government-regulated centralised system of validating transactions and keeping track of money flow.
Cryptocurrencies differ from this system in several ways. First, they are only in digital form. Second, there is no central authority that validates and guarantees transactions. Instead, the transactions are validated by other users and then stored in a secure manner. We explain the process below. Unlike a physical currency note, it is easy to copy a digital item. Therefore, a digital currency has an inherent challenge of ensuring that there is no double payment with the same currency.
All users in the system have access to the account balance of all other users code-names may be used to protect privacy. Other users verify the block by checking whether the person making the payment had sufficient balance.
The block is considered valid if all transactions on it are validated by a majority of users. At this stage, the block is connected to the previous block using cryptography, and published on the system. A chain of such blocks of transactions is called a blockchain. The cryptography method used makes it very difficult to change the transactions in a validated block.
Further, a change in a block will necessitate change in all subsequent blocks, a near impossible task. Also, as multiple copies of the ledgers are kept, it would be very difficult to simultaneously tamper wih all of them.
These properties help maintain trust in the system. Benefits and risks associated with cryptocurrencies. The Inter-Ministerial Com mittee noted that the technology underlying cryptocurrencies i. Global regulators such as IMF have also noted benefits of cryptocurrencies. These currencies could provide cheaper, faster and more efficient transactions. Cryptocurrencies also provide for a more secure payment mechanism as records cannot be manipulated by a single entity , transparency in transactions, and improved ease of auditing.
However, several risks have also been associated with cryptocurrencies. First, they pose risks to consumers. Cryptocurrencies do not have any sovereign guarantee and hence are not legal tender. Their speculative nature also makes them highly volatile. A user loses access to their cryptocurrency if they lose their private key unlike traditional digital banking accounts, this password cannot be reset.
In some cases, these private keys are stored by technical service providers cryptocurrency exchanges or wallets , which are prone to malware or hacking.
Second, cryptocurrencies are more vulnerable to criminal activity and money laundering. They provide greater anonymity than other payment methods since the public keys engaging in a transaction cannot be directly linked to an individual. Third, central bank cannot regulate the supply of cryptocurrencies in the economy. This could pose a risk to the financial stability of the country if their use becomes widespread.
Cryptocurrency regulation in other jurisdictions. Considering these benefits and risks, countries are regulating cryptocurrencies in various ways. In Canada, cryptocurrencies are regulated under the money laundering and terrorist financing laws.
Japan permits the use of cryptocurrencies as a payment system. In New York, use of cryptocurrency as a payment mechanism is permitted subject to licensing requirements. Several countries such as China, Thailand, Indonesia and Taiwan ban the use of cryptocurrency.
For example, the European regulators for securities, banking, and insurance and pension issued a joint statement cautioning that virtual currencies are highly risky and unsuitable as investment, savings or retirement planning products. Definition of cryptocurrency may be too broad.
Definition of cryptocurrency may include tokens or value generated through non-cryptographic means. The draft Bill defines cryptocurrency as any information, code, number or token, generated through cryptographic means or otherwise , which has a digital representation of value and has utility in a business activity, or acts as a store of value, or a unit of account.
It bans all such cryptocurrencies. It may be argued that this definition is too broad. It may include certain tokens which are not generated through cryptographic means, and hence do not pose the risks associated with cryptocurrencies.
For example, this may include online discount coupons, gift cards, and loyalty reward points such as the frequent flyer miles as they provide a digital representation of value and act as a store of value. Note that under the draft Bill, the central government may exempt certain activities from the list of prohibited activities, if necessary in public interest. Definition of cryptocurrency differs from international standards.
Other jurisdictions define cryptocurrencies in a more precise manner. The Financial Action Task Force an intergovernmental organisation to combat money laundering defines it as a math-based decentralised, convertible virtual currency which is protected by cryptography. The state of New York defines virtual currency as any digital unit that is used as a medium of exchange, or a form of digitally stored value.
Penalties for certain offences may be disproportionate. Under the Bill, mining, holding, selling, issuing, transferring or using cryptocurrency is punishable with an imprisonment of up to 10 years. This may be disproportionate as compared to other similar economic offences. Table 1 provides a comparison of the penalties prescribed under the Bill with some other offences. Table 1: Comparison of penalties prescribed under various economic offences.
Maximum imprisonment. Mining, holding, selling, issuing, transfer or use of cryptocurrency in the country draft Bill. Involvement in activities connected with proceeds of crime including its concealment, possession, acquisition or use or projecting it as untainted property PMLA. Holding of foreign exchange of aggregate value exceeding one crore rupees FEMA.
Payment Services Act, Act No. The opinions expressed herein are entirely those of the author s. PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.
Education Graduation :. Education Post Graduation :. Parliament States Primer. Parliament States. State Assembly. Highlights of the Bill The draft Bill seeks to prohibit mining, holding, selling, trade, issuance, disposal or use of cryptocurrency in the country.
Cryptocurrency is defined as any information, code, or token which has a digital representation of value and has utility in a business activity, or acts as a store of value, or a unit of account. Under the draft Bill, mining, holding, selling, issuing, transferring or use of cryptocurrency is punishable with a fine or imprisonment of up to 10 years, or both. A person must declare and dispose of any cryptocurrency in his possession, within 90 days from the commencement of the Act.
India announces bill to ban private cryptocurrencies
RBI Favours Complete Ban On Crypto; It Is A Serious Concern To RBI, Says Governor
It is estimated that more than million investors have joined the crypto club in India. India has the largest number of crypto investors in the world, according to some research reports. In light of the increased investment in cryptocurrencies, the government has for some time considered whether to regulate its mining and trade. Discussions on the crypto sector became active in India in after the Reserve Bank of India RBI banned crypto transactions promoted by other lenders. In late , the RBI lifted the ban, backed by a Supreme Court ruling that did not support the crackdown on cryptocurrency activity. To continue cryptocurrency activities, the Treasury was tasked with developing a bill listing ideas for normalizing domestic cryptocurrency-related activities. This process is managed by Finance Minister Nirmala Sitharaman himself. It was expected that a concrete law on this digital financial sector would be enacted in , but the plan continued to be delayed and did not reach a conclusion. The crypto bill was not included in the list of announcements by the Monsoon Parliament last year because work was not completed at that time. In late September , the Treasury will be a new member to analyze whether income generated from cryptocurrency transactions can be taxed as capital gains or whether it needs to be classified in the newly created tax category.
Why the Supreme Court set aside RBI's ban on cryptocurrency trading
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In favour of complete ban on cryptos: RBI to Central Board
By Suchitra Mohanty , Nupur Anand. The Reserve Bank of India RBI had in April ordered financial institutions to break off all ties with individuals or businesses dealing in virtual currency such as Bitcoin within three months. The ban led to plummeting trade volumes and exchanges shutting their businesses. However, the industry still faces hurdles as a government panel has recommended a ban on all private cryptocurrencies. In July, the panel also recommended jail of up to 10 years and heavy fines for anyone dealing in digital currencies.
Indian crypto sector expects some clear regulations for the industry in the upcoming budget.
The government is all set to table a comprehensive bill on cryptocurrency which may be presented in the coming Winter Session of Parliament. The Standing Committee on Finance is scheduled to hold talks on crypto assets in the next meeting on November 15, India Today reported. The central bank on Friday made its position clear on the digital assets, stating it has grave concerns regarding them, reaffirming its consistent position on the use of virtual currencies. We have major concerns around cryptocurrencies, which we have conveyed to the government. Also Read: PM Modi chairs meeting on cryptocurrencies; govt to engage with experts, stakeholders. The government is indisposed to taking a position on cryptocurrencies like China, which has banned the digital assets. The idea is to adopt a more moderate regulatory path, which could mean that India may not ban cryptocurrencies completely. The concern the government needs to clear up is whether such digital assets get treated as currencies or investment assets.
India's top court strikes down RBI banking ban on cryptocurrency
The RBI is exploring the possibility of coming up with an official digital token in the country. In a meeting chaired by Prime Minister Narendra Modi recently, the Union government and the Reserve Bank of India RBI were not quite on the same page on cryptocurrency — a sector that has been silently blooming in India over the past few months. On the other hand, the Modi government and its departments mooted for a strong regulatory control on cryptocurrency to avoid money laundering and terror financing, rather than banning it entirely.
Das said in an interview that the RBI is working on a phased implementation strategy for the same. He added that the bank is "extremely careful" about the central bank digital currency CBDC , which is a new product for it. This is an important statement from the governor of the country's central bank, in view of the rise in popularity of cryptocurrency. The Supreme Court has already quashed a circular of the RBI to ban banks and financial institutions from providing services to any individual or business entities dealing with or settling cryptocurrencies, including Bitcoin.
The RBI has been working towards a phased implementation strategy for central bank digital currency. Image: AFP. The central bank has already conveyed this message to its central board directors. The RBI has been working towards a phased implementation strategy for CBDC, however, it had on several occasions in the past, expressed reservations with private crypto currencies. However, some board members sought a balanced view on these digital assets, taking into account developments in the technological space and larger implications for the financial sector, according to the report.
While the older law sought to impose a complete ban on all crypto-related activities including mining, buying, holding, selling, and dealing, the new one will look to make a clear distinction when it comes to its often used categorisation as a currency. Currently, there is no regulation or any ban on the use of cryptocurrencies in the country. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.