India is looking forward to introduce a law to ban cryptocurrencies, as the govt. sees a simple legal framework as being better than a circular from the RBI within this regard. “A note has been moved (by the finance ministry) for inter-ministerial consultations,” a senior government official told ET.
The spur for the draft cabinet note was the 4th March decision of the Supreme Court to quash the April 2018 circular from the RBI that halted banks from offering services in favour of cryptocurrencies, said the official cited above.
The note will then be sent to the cabinet after consultations and, subsequently, to Parliament. If it’s along similar lines as an earlier proposal, the law will deal a blow to investors, exchanges and other entities dealing in digital assets like bitcoin, experts added.
A high-level government panel, earlier in July 2019, prepared a draft law demanding for a complete ban on all sorts of private crypto assets. It also suggested to introduce a penalty of upto Rs 25 Cr as well as imprisonment of up to 10 years for anyone who deals in them.
At the time, the court had said: “While we’ve recognised… the utility of RBI to require a preemptive action, we are testing within this part of the order the proportionality of such measure, for the determination of which RBI must show atleast some of semblance of any damage cause by its regulated entities. But on the actual notes, there’s none.”
The ruling lifted an existing ban on trading in crypto assets and had prompted startups to say they might revive plans to take a new position and expand business within India.
However, the going hasn’t been smooth, industry experts said. Number of banks haven’t still permitted payments for currency trades in India or overseas, within the absence of any specific communication from the RBI following the Supreme Court decision. Still, transactions are being processed via several other channels, the experts added.
The draft rules within the July 2019 proposal were too harsh, said one among them. Such a proposed legislation would make it “illegal to carry , sell, issue, transfer, mine or use crypto assets and, if passed within the current form, would completely decimate the crypto-industry within India.”
He hoped the govt would conduct stakeholder consultations and not plow ahead with the bill in its present form.
The panel, headed by former finance secretary Subhash Garg, had, in its report, advocated a ban on all sorts of private virtual currencies, though it asked the RBI along with the government to introduce some offline form of virtual currency.
The draft law prepared by the committee said any direct or indirect use of crypto assets are going to be punishable with a fine or imprisonment, which shall not be less than a year, but might extend up to 10 years.