As the country plans to ban cryptocurrency again, the RBI mulls over the possibility of a Digital Rupee
The Indian Government has announced it plans to pass new legislation to ban all private cryptocurrencies in the country. The official announcement by the country’s lower house of parliament further states that the proposed bill ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ will feature the framework for the development of India’s Central Bank Digital Currency.
Local reports suggest that there are over 7 million people who own over $1 billion worth of digital assets in India. While the proposal does indicate that several exceptions to the crypto ban will enable innovation and allow the promotion of blockchain technology in India, the country’s long-standing hostile relationship with digital currencies has led to concerns being raised by stakeholders from the industry.
Despite being one of the fastest-growing technology hubs in the world, Indian regulators have viewed cryptocurrencies like Bitcoin with suspicion. The Reserve Bank of India, the country’s central bank, first issued a ban on cryptocurrencies in 2018, forbidding all banks in the country from dealing with crypto businesses. However, the ban was called unconstitutional and overturned by the Supreme Court in March 2020.
The Supreme Court’s decision was widely celebrated by investors, developers, and cryptocurrency users in the country as the trading volume for Bitcoin and other digital currencies on local exchanges began growing at increasing rates.
However, rumors of another ban on cryptocurrencies in India emerged only within five months of the Indian court’s decision. Money Control reported that the RBI was working with two other governmental ministries to prepare a new law to ban crypto trading as the regulators are skeptical about digital currencies and are apprehensive about the associated risks.
It was further said that the new ban would involve a change in legislation to avoid another turnabout from Indian courts by making it legally binding. This is currently set to be proposed in the Budget Session of the parliament that began on 30 January.
The proposed bill is further expected to address the possibility of a Digital Rupee. In a document titled the ‘Booklet on Payment Systems’ released last week, the RBI states “Innovations are changing the payments space rapidly. This has made central banks around the world examine whether they could leverage on technology and issue fiat money in digital form.”
It continues, “RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it.”