At an IMF and World Bank meeting, Indian Finance Minister Nirmala Sitharaman talked about cryptocurrency and stablecoins when asked about Facebook’s Libra digital currency project. RBI Governor Shaktikanta Das also addressed the subject at the conference.
At the Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund (IMF) in Washington, D.C., Indian Finance Minister Nirmala Sitharaman talked about cryptocurrency and stablecoins, PTI reported. The annual meetings and related events took place from Monday, Oct. 14, through Sunday, Oct. 20. The news outlet added that Shaktikanta Das, Governor of the Reserve Bank of India (RBI), also spoke about cryptocurrencies during one of the interventions.
Indian Finance Minister Nirmala Sitharaman in a group photo with other governors at the IMF and World Bank Annual Meetings 2019.
A group of reporters asked Sitharaman on Sunday about Facebook’s Libra crypto project. She responded, “On our side, the Reserve Bank governor spoke about it during our turn to intervene,” adding:
I got the sense that many countries were cautioning on rushing into this.
Since Facebook unveiled its plan for the Libra project in June, many regulators worldwide have been scrutinizing the project. France and Germany are even reportedly discussing banning Libra in their countries, at least until all the concerns have been addressed. As for India, former Secretary of the Department of Economic Affairs Subhash Chandra Garg previously said that the Indian government will not allow Libra in the country since it would be a private cryptocurrency.
Nirmala Sitharaman addressing the Plenary Session of the IMF and World Bank Annual Meetings on Oct. 19.
“Some of them (countries) of course even suggested that they shouldn’t be using, all of us shouldn’t be using the name stable currency because that’s the expression they used,” Sitharaman was further quoted by PTI as saying. “Many cautioned to the extent saying even the name should not be stable currency, it should relate to virtual currency or something of the kind.” The finance minister added that “countries will have to show extreme caution much before anything is said or moved on this.”
Nonetheless, some positive aspects of cryptocurrency were discussed, as Sitharaman revealed:
In fact, this morning some of the presentations were also highlighting the strengths of such virtual currency.
“But equally everyone without fail spoke about the challenges together with talking about it as a necessary step forward,” she continued. “So everyone was stepping cautiously on it.”
The Indian government is currently deliberating on the country’s crypto policies. A report and draft bill entitled “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” were submitted to the Ministry of Finance in February and made public in July. Both were produced by an interministerial committee (IMC) headed by Garg who has since been reassigned to the Power Ministry.
Nirmala Sitharaman
While the Indian government has not announced any decisions regarding the bill or the regulation of cryptocurrency, it has told the country’s supreme court that the crypto bill may be introduced in the next session of parliament. In July, the finance minister talked about the IMC report, calling it “a very futuristic and well-thought-out report,” but admitted that she had “not spent time on it after the presentation.”
Meanwhile, the Indian crypto community has been actively campaigning for the government to reevaluate the IMC recommendations, emphasizing that the report is flawed. At least one lawmaker is willing to listen and help the community. Further, the RBI has prohibited financial institutions from providing services to crypto businesses. The ban, which went into effect in July last year, has been challenged in the supreme court, which is expected to resume hearing the case on Nov. 19.
IMF’s Approach to Crypto
At the same conference, IMF Managing Director Kristalina Georgieva also briefly talked about cryptocurrency and stablecoins such as Libra, PTI also reported. She revealed that the IMF has been engaged quite extensively with other organizations on this subject, such as the Financial Stability Board (FSB) and the European Central Bank, including assessing the benefits and risks involved. Georgieva elaborated:
We take a very balanced approach. We look at the ease of use, cost savings, and most importantly, financial inclusion as very important benefits. But we are also very mindful that they can be a risk for privacy, consumer privacy.
After noting the risks that digital currency can be “abused for illegal purposes,” the IMF managing director said that there are also “issues on sovereignty that need to be well understood and addressed. And in that sense, we will continue to work.” Georgieva further commented:
We are not specifically focusing on Libra. We are looking into, one, the inevitability of expanding digital money on the wave of the digital revolution, but then the necessity to do so, mindful of monetary stability.
Last week, the FSB chairman wrote a letter to the G20 finance ministers and central bank governors informing them that, unlike crypto assets, stablecoins with the potential to be adopted globally do pose financial stability risks. A recently released G7 report outlines some of these risks. In addition, the G20 issued a statement last week that stablecoins “with potential systemic footprints give rise to a set of serious public policy and regulatory risks,” adding that they “need to be evaluated and appropriately addressed before these projects can commence operation.”
What do you think of the Indian finance minister’s view on cryptocurrency and stablecoins? Let us know in the comments section below.
Images courtesy of Shutterstock and Nirmala Sitharaman.
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India’s finance minister has broken silence and talked about the crypto draft bill and report her department is examining which propose to ban cryptocurrencies. While she views the report as “very futuristic and well-thought-out,” the crypto industry sees it as flawed and incomplete.
The Indian finance and corporate affairs minister, Nirmala Sitharaman, talked about the cryptocurrency report and draft bill her ministry is examining in an interview published by The Economic Times on July 29. The report, which contains a draft bill entitled Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019, was made public on July 22. It was submitted by the interministerial committee constituted on Nov. 2, 2017, to study all aspects of cryptocurrency and provide recommendations. The committee has recommended a ban on all “private cryptocurrencies.”
Nirmala Sitharaman
The finance minister was asked during the interview: “When are you proposing to take the legislation to [the] cabinet?” She replied: “I had the presentation done before me. The committee has done extensive work on it. Inputs that have come in; if I compare several other countries where this kind of study has been done on cryptocurrencies, we have done very well.” Sitharaman continued:
They have gone much ahead of all other countries that have thought about it. It’s a very futuristic and well-thought-out report. I have not spent time on it after the presentation.
“Of course, we will look into it soon and come back with a position. That was also reported in court as there is a case going on,” the finance minister concluded.
Several crypto-related writ repetitions are pending at the Supreme Court of India which was scheduled to hear them all on July 23 after repeated delays since last year. At press time, the court still has not heard the case. Some petitions challenge the banking restriction imposed by the Reserve Bank of India (RBI). The central bank issued a circular in April last year banning regulated financial institutions from providing services to crypto businesses. The court has also asked the government to submit the interministerial committee’s crypto report.
Finance Minister ‘Misinformed’
Varun Sethi, founder of Blockchain Lawyer, shared some thoughts with news.Bitcoin.com on the finance minister’s reply to The Economic Times. The “finance minister has apparently not stated anything negative,” he said. Since her position “falls under the Ministry of Finance, under whom the Department of Economic Affairs also falls, so ideally the report is made under her ministry only,” Sethi added. Noting that the chances of her “commenting publicly against the report don’t stand,” he opined:
There is surely no doubt that Indian report is rather comprehensive however she has reserved her comments about her thoughts post the issuance of report, thereby the reactions by the community are yet to be captured.
Responding to the finance minister’s comments, Nischal Shetty, CEO of local crypto exchange Wazirx, tweeted to Anurag Singh Thakur, Minister of State for Finance and Corporate Affairs. “Misinformation about crypto has reached our FM due to the flawed crypto report. Ban is never a futuristic solution to anything. Report does not even classify crypto correctly. Please give the crypto industry an opportunity to represent,” he emphasized.
Shetty shared with news.Bitcoin.com:
This is probably the first time she’s spoken about crypto. It’s a start and while her comment is from only one side, the flawed crypto report, we’re hopeful she gives the crypto community of India a chance to present our view of crypto.
“I’m sure she’ll take an informed decision and change her opinion once true facts are laid down in front of her,” he believes. Convinced that the finance minister has been misinformed, he declared: “We need to campaign harder so that the right information about crypto reaches her. She’s been presented an incomplete idea of crypto.”
The Wazirx CEO has been running a social media campaign calling for the Indian government to introduce positive crypto regulation. It has been 271 days since the launch of his campaign. Ever since the interministerial committee’s report was made public, he has ramped up efforts to engage lawmakers to help them understand how flawed the report is, as news.Bitcoin.com previously reported.
Commenting on the finance minister’s view on the crypto report, Sumit Gupta, CEO of local crypto exchange Coindcx, told news.Bitcoin.com: “I appreciate the comment of the finance minister and I guess her understanding of the global scenario is much wider.” Noting that the finance minister participated in the recent G20 meetings, he remarked: “I believe her interaction with other finance ministers might help in drawing the midway for the crypto industry. There is always a possibility that the government may not be that harsh on cryptocurrency in order to meet global standards and stay par with the developed world as envisioned by our prime minister. Fingers crossed.”
Social media influencer for the Indian crypto community who goes by Twitter handle “Indian Cryptogirl” also shared some thoughts with news.Bitcoin.com. “I ask you, how is a report that encourages a closed private ledger and criminalizes decentralized public cryptocurrency futuristic?” she said. “India is choosing a national currency because they want money to remain within its borders and to give them control over the supply and monetary policy. This isn’t a cryptocurrency, it’s just another e-payment solution by the government which is recorded on a ledger.” She further elaborated:
In her closing remarks, she said that she will be looking at it again and come to a position. This is why the Indian community is coming together and appealing to national leaders in full force.
Both Sitharaman and Thakur have indicated that they are listening to the community. Sitharaman tweeted in June: “Grateful for every thought/idea that’s being shared by scholars, economists and enthusiasts through print, electronic, and on social media. I read many of them; also, my team carefully collates them for me. Value every bit. Thanks. Please keep them coming.”
As for Thakur, he tweeted on July 26: “I have an open glass door policy. We will continue to have a multi-stakeholder approach to policymaking. I am extremely clear and committed towards this as a minister” (in Prime Minister Narendra Modi’s government). Thakur recently confirmed in Rajya Sabha, the upper house of India’s parliament, that the government has not banned cryptocurrency in the country.
Anurag Singh Thakur
Industry Body’s Suggestions
The Indian National Association of Software and Services Companies (Nasscom) is a non-profit information technology industry association self-described as “the apex body for the 154 billion dollar IT BPM industry in India. Among its initiatives, the group “Liaisons with government and industry to influence a favourable policy framework,” its website states.
The association said Tuesday that, instead of banning, the government should “work towards developing a risk-based framework to regulate and monitor cryptocurrencies and tokens,” Business Standard reported. This recommendation is in line with the recently issued crypto guidance by the financial action task force (FATF). Nasscom detailed:
A ban would inhibit new applications and solutions from being deployed and would discourage tech startups. It would handicap India from participating in new use cases that cryptocurrencies and tokens offer.
The association believes that “a ban is more likely to deter only the legitimate operators as they have no intent to be non-compliant,” the news outlet conveyed.
“To address consumer protection concerns, cryptocurrency-based businesses can be tested in the regulatory sandboxes being launched by the financial sector regulators across the country,” Nasscom recommends. “We should work towards creating a regulatory framework that will constantly monitor and prevent illegal activities. Regulating would allow the law enforcement agencies to be better equipped to understand these new technologies, enable them to gather intelligence on criminal developments and take enforcement actions.”
This is not the first time Nasscom has spoken in favor of regulating crypto assets. In February, it released a report calling for regulatory certainty, particularly in areas such as cryptocurrency.
Report, Draft Bill, and Garg’s Exit
The report containing the bill to ban cryptocurrencies is dated Feb. 28 even though it was made public on July 22. The interministerial committee drafted the report under the chairmanship of former Secretary of the Department of Economic Affairs (DEA) Subhash Chandra Garg. The “Committee is very receptive and supportive of distributed ledger technologies and recommends its widespread use in delivering financial services … Private cryptocurrencies are of no real value. Rightly banned,” he tweeted following the public release of the report.
Three days later, Garg announced that he is no longer the DEA Secretary, due to Prime Minister Narendra Modi reshuffling his top-level bureaucrats. Garg has been moved to the Power Ministry, as news.Bitcoin.com reported.
What do you think of the Indian finance minister’s view on the crypto report? Do you think a plan to ban crypto could be “futuristic”? Let us know in the comments section below.
Images courtesy of Shutterstock, DNA India, and the Indian government.
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The Indian government official who headed the committee which drafted the bill to ban cryptocurrencies has applied for voluntary retirement after releasing the report and draft bill which the crypto community calls “flawed.” Meanwhile, the government has confirmed that cryptocurrency is currently not prohibited in the country and the recommendations are being examined by relevant authorities.
India’s cryptocurrency bill has been drafted by an interministerial committee headed by former Department of Economic Affairs (DEA) Secretary Subhash Chandra Garg. The committee began working on crypto recommendations since November 2017 and finally submitted its report with a draft bill to the Ministry of Finance on July 22. After both the report and the bill were made public, Garg tweeted that his “Committee is very receptive and supportive of distributed ledger technologies [DLTs] … [but] Private cryptocurrencies are of no real value. Rightly banned.”
His tweet did not fare well within the Indian crypto community, as comments soon flooded his account in response. Some criticized his definition of private cryptocurrencies. “Sir, BTC is not private, it’s more transparent than your INR,” a comment reads. Others pointed out that crypto is the future in advanced countries and banning it would cost India jobs, investments, talent, and more.
The community was also quick to point out that cryptocurrency is not banned in India despite Garg’s tone which could be misconstrued otherwise. A number of people contested the committee’s finding that “There is no underlying intrinsic value of these private cryptocurrencies,” with some arguing that embracing DLT while banning cryptocurrency is ludicrous. News.Bitcoin.com recently reported on the content of this bill including crypto-related prohibitions and offenses.
Garg Unexpectedly Quits
On July 24, Indian Prime Minister Narendra Modi reshuffled his top-level bureaucrats and appointed Department of Investments and Public Asset Management Secretary Atanu Chakraborty as the new DEA Secretary. Garg has been appointed Secretary of Ministry of Power, primarily responsible for the development of electrical infrastructure across the country. According to local media, he is unhappy with the shift and has subsequently applied for voluntary retirement. He made a final tweet from his DEA Secretary Twitter account on July 25, confirming the story.
Garg’s replacement has given Indians some hope as they see a possibility that the new DEA Secretary could take a more positive approach to cryptocurrency.
Subhash Chandra Garg
“Good riddance! for not understanding basic crypto uses and biased report written to [the] government. I hope the next person in office after you is educated enough,” one Twitter user commented. Many others shared this sentiment in their own comments. “With cryptos, you proved your inability to grasp new technology and its adoption,” another declared.
Some went as far as accusing Garg of ruining people’s livelihood and fleeing when the situation got out of control as people became upset. “You should be jailed or [an] investigation should be launched against you for the deterioration of the Indian economy,” according to one user. Another wrote:
[The] Entire crypto community in India is happy to know that you are quitting.
Nearly all the responses to Garg’s final tweet as the DEA Secretary are about crypto, with some people still asking him to change his mind about banning it before he leaves and ensuring its regulation.
Crypto Currently Not Banned in India
The Indian government has recently confirmed that cryptocurrency is currently not banned in India. Shri Anurag Singh Thakur, Minister of State in the Ministry of Finance, told Rajya Sabha, the upper house of India’s parliament, on July 16 that the government has not prohibited cryptocurrency in the country.
Anurag Singh Thakur
According to the Ministry of Finance:
This [Garg’s committee] report and draft bill will now be examined in consultation with all the concerned departments and regulatory authorities before the government takes a final decision.
“After this, if the government decides to go ahead with the ban, this bill will be presented in parliament for debate, and vote. If it’s approved by the majority, it will be sent to the President for his approval as per Article 111,” explained Nischal Shetty, CEO of local crypto exchange Wazirx. “Only after his assent, can a bill become an Act of Parliament.” He further cited one of the recommendations in the report, stating that “It is also possible that the government may establish a standing committee to revisit the issues addressed in the report as and when required.”
Bill and Report Dated Feb. 28
Even though the interministerial committee report (IMC) was made public on July 22, it is dated Feb. 28, which some criticize as being too outdated given recent major developments such as the G20 summit and the release of new crypto standards by the Financial Action Task Force (FATF). The FATF guidance was released on June 21. India, along with other G20 nations, has reaffirmed its commitment to applying these standards.
Sumit Gupta, CEO of local exchange Coindcx, shared his thoughts with news.Bitcoin.com, stating that “The report cracks fundamentally at places, there were few flaws pointed out in its understanding of DLT/cryptocurrencies and seems dated (5 months old).”
The Indian supreme court is expected to address the IMC report in the upcoming hearing of writ petitions against the banking restriction by the central bank. Gupta believes that “This document, which is framed prior to India’s commitment to FATF recommendations, shouldn’t be set as the benchmark for the supreme court hearing,” adding that “Hopefully, the court asks the DEA to review it again and make a fresh recommendation in view of the major global developments since then.”
Shetty further asserted:
The report has completely ignored the FATF guidelines which clearly states that crypto is not a threat to the global economy, and can be regulated properly.
Flawed Crypto Report
The Wazirx CEO believes that everything is wrong with the committee’s report. “It’s unfair to allow a committee made up of non-technologists to make a decision on an innovative technology still in the nascent stage. It’s shocking to think that people from the industry were never consulted before preparing the report,” he opined.
Even the classification of cryptocurrency is flawed, he detailed, adding that the committee recommends a ban on the use of crypto as legal tender or currency without mentioning other possible classifications such as asset, utility, or securities. “It shows that they don’t have enough understanding of crypto,” he remarked.
Before publishing the report, the committee claims to have studied how a number of countries treat cryptocurrency. However, Shetty pointed out some inaccuracies. For example, “The report also incorrectly mentions that crypto is banned in China, but in reality, holding crypto is not banned,” he clarified, noting that “recently, bitcoin was legally recognized by a Chinese court, whereby it was concluded that it should now be considered as digital property.” The CEO continued:
I hope that the Indian government will keep an open mind, and not take such a regressive decision that will push us decades behind. IMC’s report is flawed, and lacks a fundamental understanding of cryptocurrencies.
“The report exhibits that there was no clear consensus in the committee on banning. Interestingly, the committee also understands that considering the nature of technology, banning might not be effective,” Gupta further shared with news.Bitcoin.com. “As DLT is a fast-evolving technology, it’s recommended that standing committee should discuss some of these points openly and more frequently with industry experts outside the government and come up with the right ways to regulate the industry effectively rather than outrightly banning it. The solution is to educate, regulate and allowing people to innovate.”
Meanwhile, there are several ways the community can help the Indian government understand crypto. News.Bitcoin.com previously reported on some ideas for the community to help. Shetty urges all Indians to “Write physical letters to your local MPs, our finance minister, and prime minister explaining why this IMC report is flawed.”
Do you think Garg’s voluntary retirement is related to his crypto recommendations? Do you think the Indian government will adopt the bill by Garg’s committee as is? Let us know in the comments section below.
Images courtesy of Shutterstock and the Indian government.
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The Indian government has officially released the report by the interministerial committee tasked with proposing crypto measures. The announcement came one day before the country’s supreme court was scheduled to hear the writ petitions against the crypto banking restriction. The report contains the draft bill which proposes a ban on cryptocurrency.
Draft Bill Now Public, Supreme Court Hearing Delayed
The Indian supreme court was scheduled to hear the crypto case on July 23. It was expected to address the banking restriction by the central bank, the Reserve Bank of India (RBI). However, the case was not heard by the court on Tuesday.
On Monday, the Ministry of Finance published the long-awaited crypto regulatory report by the interministerial committee under the chairmanship of Secretary of Economic Affairs Subhash Chandra Garg, who is also the country’s finance secretary. The ministry confirmed that the “Report of the committee to propose specific actions to be taken in relation to virtual currencies” has been submitted to the government. It contains the draft “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019.”
The Ministry of Finance’s announcement reads:
This report and draft bill will now be examined in consultation with all the concerned departments and regulatory authorities before the government takes a final decision.
The report discusses distributed ledger technologies (DLTs), virtual currencies, initial coin offerings, a digital rupee (central bank digital currency), the potential uses of DLT for financial services, and recommendations for both DLTs and cryptocurrency. “The mandate of the committee has been to study various issues pertaining to virtual currencies and to propose specific actions that may be taken in relation thereto,” the report describes.
Full Ban Proposal
The draft entitled “Banning of Cryptocurrency & Regulation of Official Digital Currency Bill 2019,” included in the report submitted by the Garg committee, is an updated version of the one previously leaked, as news.Bitcoin.com reported. However, much of the crypto-related prohibitions and offenses are unchanged.
Following the release of his committee’s report, Garg tweeted on July 22 that “Private cryptocurrencies are of no real value. Rightly banned.”
Noting “extreme fluctuations” in their prices, the committee proposes that “private cryptocurrencies should not be allowed,” stating:
The committee has recommended a law banning the cryptocurrencies in India and criminalizing carrying on of any activities connected with cryptocurrencies in India.
The committee believes that private cryptocurrencies have “no underlying intrinsic value” and “lack all the attributes of a currency.” The report adds that “There is no fixed nominal value of these private cryptocurrencies i.e. neither act as any store of value nor they are a medium of exchange.”
Proposed Prohibitions
According to the bill, “No person shall mine, generate, hold, sell, deal in, issue, transfer, dispose of or use cryptocurrency in the territory of India.” In addition to disallowing cryptocurrency for use as “legal tender or currency at any place in India,” the bill proposes that “No person shall directly or indirectly use cryptocurrency in any manner, including as (a) a medium of exchange; and/or (b) a store of value; and/or (c) a unit of account.”
As previously reported, the bill also states that “Whoever directly or indirectly mines, generates, holds, sells, deals in, transfers, disposes of or issues cryptocurrency … shall be punishable with fine or with imprisonment which shall not be less than one year but which may extend up to ten years, or both.” Moreover, “Whoever directly or indirectly promotes, issues any advertisement, solicits, abets or induces any participation in any activity involving the use of cryptocurrency … shall be punishable with fine or imprisonment which may extend up to seven years or both.”
Regarding the RBI ban, the report reveals that the committee “endorses the stand taken by the RBI to eliminate the interface of institutions regulated by the RBI from cryptocurrencies … The committee also recommends that all exchanges, people, traders and other financial system participants should be prohibited from dealing with cryptocurrencies.”
Sandeep Goenka, co-founder of Zebpay, formerly one of the largest crypto exchanges in India, pointed out:
The recommendation report is dated 28th Feb 2019, hopefully, they review again and are asked to submit another recommendation report. A lot has happened globally since then.
Another recommendation the committee made is for the government to establish “a standing committee to take into account the technological developments globally and within the country and also the views of global standard-setting bodies to revisit the issues addressed in the report as and when required.”
Last-Minute Change
The Indian government was initially in favor of regulating cryptocurrency rather than imposing a blanket ban on it, Business Standard reported July 23, noting that Garg pressed for “accepting virtual currencies as an economic phenomenon,” arguing that “regulating it will likely lead to better results.”
The committee first met in November 2017 and broadly agreed that banning would be difficult to implement, opting to focus on determining whether cryptocurrency should be classified as a commodity or a financial asset. They also recognized that a ban may “drive some operators underground, which may encourage [the] use of such ‘currencies’ for illegitimate purposes,” the news outlet cited the minutes of the meeting.
The second meeting took place on Feb. 22 last year, shortly after former Finance Minister Arun Jaitley said during his budget speech that cryptocurrency was not legal tender and steps would be taken to eliminate its use. During this meeting, the regulators were in favor of imposing a complete ban on cryptocurrency. Central Board of Direct Taxes Chairman Sushil Chandra said that it creates “a chain of black money,” the publication conveyed.
However, Garg noted that cryptocurrency would be discussed at the G20 meetings and a fresh look might be warranted. He suggested that using crypto in payment systems should not be fully banned, considering the nature of the technology. Ministry of Electronics and Information Technology Secretary Ajay Prakash Sawhney concurred. The committee decided to form two sets of papers — one for banning and the other for regulating cryptocurrency. According to the news outlet, during the next meeting held on Jan. 9 — almost a year later — the committee agreed upon the draft bill to ban cryptocurrency.
Do you think that India will adopt this version of the bill and fully ban cryptocurrencies? Let us know in the comments section below.
Images courtesy of Shutterstock and Twitter.
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A draft cryptocurrency bill for India has been leaked in full, but details of the bill have raised some questions. News.Bitcoin.com talked to a number of experts in the field who shared their analyses of the bill’s content and its implications on the Indian crypto industry.
The draft cryptocurrency bill, which has been causing quite a stir within the Indian crypto community, has surfaced in its entirety. Varun Sethi, founder of Blockchain Lawyer, shared on Monday the document entitled Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019. News.Bitcoin.com previously provided a preliminary analysis of this rumored bill after Bloombergquint and The Economic Times made outrageous claims about it.
India is currently deliberating on the regulatory framework for cryptocurrency. An interministerial committee headed by Finance Secretary and Secretary of Economic Affairs Subhash Chandra Garg was tasked with studying all aspects of cryptocurrency and recommending crypto regulation for India. Garg said last month that his committee’s report was ready to be submitted to the finance minister for approval.
Important: Bill Is Unofficial and RBI Denies Involvement
Before paying much attention to this bill, there are several important points to note. First and foremost, this bill was not announced by the Indian government so its veracity is in dispute.
Advocate Mohammed Danish, co-founder of Crypto Kanoon, an Indian platform for blockchain and crypto regulatory news and analysis, told news.Bitcoin.com:
This document cannot be claimed as the final recommendation of the expert committee to the Ministry of Finance. The document contains no mark of authentication on it nor it has come out from any official source.
Another important observation is that at least one of the regulators listed on this bill has denied its involvement. The last page of the bill provides a list of “appropriate regulators,” namely the Insurance Regulatory and Development Authority of India, the Pension Fund Regulatory Development Authority, the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), “and any other appropriate regulator as may be notified by the central government.”
However, in its reply to a Right to Information (RTI) request filed by Sethi, the RBI stated last month that it did not have any knowledge of this bill. In addition, the central bank confirmed that it neither proposed a ban on crypto assets nor had knowledge of any other government departments doing so. After sharing a copy of the bill, Sethi asserted Monday:
This looks like a very very rough draft of a proposed bill … [it might be] just a random discussion paper and it may not actually become [a] bill in the same manner and mode in which this has been stated.
Draft Bill Far From Becoming Law, Plenty of Changes Expected
Nischal Shetty, CEO of local crypto exchange Wazirx, immediately tweeted in response to the leaked bill. He advised everyone not to panic until a bill becomes law. “This crypto bill has not been introduced in [the] current Parliament session,” he emphasized. “This looks like a rough draft, plenty of changes to come.” Shetty has been running a Twitter campaign calling for the Indian government to introduce positive regulation for cryptocurrency.
He explained to news.Bitcoin.com that “The Monsoon session of Parliament will not be discussing this bill, which means now we need to see if it gets discussed in the next parliament session which might be in December,” adding:
Regardless, there are many bills pending to be discussed in Parliament so there’s low likelihood of this bill being heard.
The CEO opined: “If this is a real draft then it’s a very regressive approach to new technology. I’m certain our lawmakers will question and amend it such that the ban applies on money laundering and not on entrepreneurship or public participation.”
Sumit Gupta, CEO of local crypto exchange Coindcx, said to news.Bitcoin.com that “I am not sure if the government will actually go ahead and implement this, given the recent discussions Prime Minister Narendra Modi and our Finance Minister Nirmala Sitharaman had at the G20 summit in Japan.”
India, along with other G20 nations, declared its commitment last month to applying the crypto standards set by the Financial Action Task Force (FATF). Sitharaman and other G2 finance ministers and central bank governors also jointly declared their commitments to applying the FATF crypto standards.
Indian Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman.
Gupta believes that “If this becomes a law, this would be one of the biggest mistakes by the Indian government.” He described, “We will see blockchain startups moving out of the country, proficient blockchain developers moving abroad or working only on foreign projects,” adding:
At a global level, the industry will keep on growing, innovation will keep on happening, and India will lose out its technological edge, just because the government is not ready to understand this technology well.
Advocate Danish believes that “based on the language of the document coupled with other information based on earlier filed RTIs, it can be safely assumed that it may be that document which the committee has recommended.”
Positive and Surprising Aspects of the Bill
Sethi noticed some positive and surprising aspects of the bill. Firstly, according to the bill, cryptocurrency “means any information or code or number or token not being part of any official digital currency, generated through cryptographic means or otherwise, providing a digital representation of value which is exchange with or without consideration, with the promise or representation of having inherent value in any business activity which may involve risk of loss or an expectation of profits or income, or functions as a store of value or a unit of account and includes its use in any financial transaction or investment, but not limited to, investment schemes.”
Surprised that this definition includes “any information,” Sethi pointed out how this bill’s definition of crypto is “massively different from the interpretation” of other countries. As an example, he explained that if he encrypted a message to tell his friend that it is raining in Delhi and his friend decided to cancel his business trip based on this message, that piece of information would be considered cryptocurrency based on this bill’s definition.
Secondly, he also noticed that the bill allows cryptocurrency to be used for research purposes. He raised the question of what if all developers declare that their crypto projects are for research purposes. Moreover, if a college professor issues tokens for research purposes, Sethi questioned whether the professor would be allowed to sell the tokens and if anyone would be allowed to buy them.
Professor A. Damodaran of the Indian Institute of Management in Bangalore shared some thoughts with news.Bitcoin.com regarding the aforementioned bill. He remarked, “It is narrowly scoped. By design, the bill is meant to strengthen India’s Payment and Settlements Act 2007 and attack money laundering. Crypto tokens (including ICOs) which are assets/ securities are out of the ambit of this Bill,” elaborating:
The good news is that the bill does not prevent crypto tokens from being used as a development instrument to help India’s unbanked population, most of whom are poverty ridden.
About the Rumored Draft Bill
The draft bill has six main parts. Part 1 introduces the bill, states that it applies to all of India, and defines 18 terms including cryptocurrency, digital rupee, distributed ledger technology, foreign digital currency, investment schemes, miner, mining, and the RBI.
Part 2 outlines the activities prohibited. Part 3 addresses the regulation of the digital rupee and foreign digital currency, as well as prohibition on various uses of cryptocurrency. It also describes offenses and penalties. Part 4 details the powers of the investigating authority while Part 5 talks about the penalties and proceedings. The last part of the bill covers miscellaneous items such as “protection of action taken in good faith.”
The bill also proposes to amend the Prevention of Money Laundering Act 2002, and also provides a list of five appropriate regulators, as previously mentioned.
Proposed Prohibitions and Offenses
Advocate Danish further told news.Bitcoin.com: “Now coming to the provisions of the bill, the definition clause attempts to transgress than what is actually required which is giving rise to confusion in understanding the terms like ‘cryptocurrency’ and ‘distributed ledger technology’ among others. The bill prescribes punishment of fine/jail term of up to 10 years for even buying, selling and storing of cryptocurrency. The bill not just cracks down on industry players but it also gives a shock to influencers by prescribing jail term up to 7 years for soliciting or inducing participation for use of cryptocurrency.” He noted:
By making some of offences cognizable and non-bailable, this bill conveys a clear message about the policy of zero tolerance.
Danish continued: “I must say that for implementing such a special legislation, the administration/ investigating agency must be well equipped. And I don’t think the decision of Home Ministry to provide special training to the police officials in September is a coincidence.” The advocate is referring to the cryptocurrency course by the Sardar Vallabhbhai Patel National Police Academy for high-ranking officers, as news.Bitcoin.com previously reported.
Regarding the content of the bill, Chapter 5 deals with “prohibition on use of cryptocurrency,” which excludes “digital rupee, or any foreign digital currency recognized as foreign currency in India.” Section 7 of this chapter explains that “Cryptocurrency shall not be used as legal tender or currency at any place in India … No person shall directly or indirectly use cryptocurrency in any manner, including as – (a) a medium of exchange; and/or (b) a store of value; and/or (c) a unit of account.”
Section 8 of this chapter states that “No person shall directly or indirectly use cryptocurrency” for the activities subsequently spelled out. The activities are “as a payment system; buy or sell or store cryptocurrency; provide cryptocurrency related services to consumers or investors which includes registering, trading, settling, clearing or other services; trade cryptocurrency with Indian currency or any foreign currency; issue cryptocurrency related financial products; as a basis of credit; issue cryptocurrency as a means of raising funds; and/or as a means for investment.”
Chapter 6 of the bill lists offenses: “Whoever directly or indirectly mines, generates, holds, sells, deals in, transfers, disposes of or issues cryptocurrency or any combination thereof with an intent to use it for any of the purposes mentioned in [Section 7 and 8] … shall be punishable with fine as may be prescribed by the central government in the First Schedule or with imprisonment which shall not be less than one year but which may extend up to ten years, or both.” News.Bitcoin.com has previously provided some analysis of this bill.
Helping Indian Government Understand Crypto
Sethi explained to news.Bitcoin.com that this bill presents an opportunity to talk to the government about cryptocurrency. Noting that most of the bill “looks as if crypto is a crime on [the] same terms as child pornography or kidnapping,” he reiterated that “a more democratic conversation is needed with the government to make them understand what the real matter is,” suggesting:
Things like the results we got from the signature campaign shall now become more relevant … we can use it to talk to the government now.
Last month, Sethi started a campaign on Change.org for the government to start regulating the crypto industry. He now urges stakeholders to “ramp up efforts” to engage with the government to help them understand.
Akshay Aggarwal, Blocumen Studios CEO and co-founder of Blockchained India, shared with news.Bitcoin.com that “It is sad to see that after witnessing the largest industry consultation drive in India, the government didn’t pay any heed to the recommendations of the industry stakeholders.” Blockchained India recently hosted a conference called India Dapp Fest, after organizing a series of roadshow town halls for anyone to voice their regulatory suggestions. Nonetheless, he maintains:
There is still time that the Indian government takes an open outlook towards ensuring that the young entrepreneurs grab opportunities that this paradigm shift presents.
The Indian government has not given a timeframe for when the recommended crypto regulation will be made public. However, the country’s supreme court is scheduled to hear the crypto case on July 23. The court is expected to address the writ petitions against the banking restriction imposed by the central bank. The RBI issued a circular in April last year banning regulated entities from providing services to crypto businesses.
The court may also follow up on its request made in February for the government to submit the crypto regulatory report from the Garg committee within four weeks. However, the case was postponed and the court has yet to follow up on this request.
What do you think of this draft bill? Do you think it’s legitimate? Do you think the Indian government will pass this bill as is? Let us know in the comments section below.
Images courtesy of Shutterstock and India Today.
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