No proposal to recognize Bitcoin: Finance Ministry tells Parliament
The Centre said Monday that it has no proposal to recognize Bitcoin as a currency in the country. In a written reply in the Lok Sabha, the Union Finance Ministry further said it does not collect data on Bitcoin transactions in India. The Centre's response came amid confusion in the crypto market over the new cryptocurrency bill the government is planning to introduce.
Why does it matter?
- A new bill regarding a cryptocurrency ban has left the sector confused as its details are yet to be made public.
- Many expect that the government may permit investing and trading in cryptocurrencies with certain restrictions.
- The Centre is also considering launching an official digital currency instead.
- India likely has the world's largest number of cryptocurrency investors.
Centre to ban cryptocurrencies in India
The Centre has listed The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, among the 26 bills it will introduce during the ongoing Winter Session of Parliament. The bill reportedly seeks to ban the use of private cryptocurrencies with certain exceptions. It also seeks to create a framework for the creation of a new digital currency by the Reserve Bank of India (RBI).
RBI working to introduce digital currency
The Ministry said it had received a proposal from the RBI in October to amend the RBI Act, 1934 to include digital currencies under the definition of "bank notes." "The RBI has been examining use cases and working out a phased implementation strategy for the introduction of CBDC (Central Bank Digital Currency) with little or no disruption," it said.
Finance Ministry lists benefits of CBDC
In the same reply, the Finance Ministry also listed out "significant benefits" that the CBDC has the "potential" to provide. These include reduced dependency on cash, higher seigniorage due to lower transaction costs, and reduced settlement risk, the Ministry said. The CBDC may also lead to a "more robust, efficient, trusted, regulated and legal tender-based payments option," it said.
Crypto market sinks after bill announcement
India has an estimated 1.5 crore cryptocurrency investors with collective investments amounting to Rs. 45,000 crore. After the Centre listed the cryptocurrency bill for this Parliament session, prices of nearly all cryptocurrencies plummeted on Indian exchanges. Hours after the listing on November 23, Bitcoin dropped by 17%, Ethereum by 15%, and Tether by almost 18%.
RBI had earlier banned cryptocurrencies
This is not India's first attempt to regulate the crypto market. In 2018, RBI had directed financial institutions to break all ties with individuals and businesses dealing in cryptocurrency. But the direction was reversed by the Supreme Court in 2020 as it violated the freedom of trade guaranteed by India's Constitution. Since then, there have been talks to regulate the market.