India is preparing a bill to regulate cryptocurrency-the “Regulation Act of Cryptocurrency and Official Digital Currency in 2021”. The bill will be presented at the winter meeting of the Indian Parliament starting on November 29. It aims to ban all private cryptocurrencies in India in order to promote the official digital currency issued by the Central Bank of India (RBI).
Although the concept of private cryptocurrency is proposed in the bill, Indian regulation has not yet clearly defined it. This confuses the country’s cryptocurrency service providers. And panic selling also appeared in the Indian market.
On November 24, on WazirX, a well-known cryptocurrency exchange in India, Bitcoin (BTC) once dropped from around 4.3 million Indian rupees (approximately 57,600 U.S. dollars) to 3.35 million Indian rupees (approximately 44,900 U.S. dollars). The biggest drop in the day was 22%. More obvious is the sell-off of the US dollar stablecoin USDT, which fell from 75.9 Indian rupee (approximately 1 U.S. dollar) to 60 Indian rupee (approximately 0.8 U.S. dollar).
In the past 3 years, India’s attitude towards cryptocurrency has changed. In 2018, the country banned cryptocurrency trading, but the Supreme Court removed this restriction in March 2020. Local media believe that the new bill to be discussed in the Indian Parliament attempts to pave the way for the official digital currency issued by the country’s central bank by suppressing private cryptocurrencies.
India plans to ban private cryptocurrency, BTC drops 22% daily
On November 23, India’s upcoming winter parliamentary meeting to be held on the 29th will put forward the title “2021 Cryptocurrency and Official Digital Currency Regulatory Bill.” According to the parliamentary announcement, the stated intention of the bill is to provide a convenient framework for the creation of an official digital currency issued by the Central Bank of India. The bill also attempts to ban all private cryptocurrencies in India. However, it allows certain exceptions to promote the underlying technology of cryptocurrency and its use.
The banned object of the bill is “private cryptocurrency.” The bill does not give a clear definition of this concept, and leaves a lot of room for interpretation in the wording. For example, those “exceptions” to the promotion of cryptocurrency technology and its use.
This has brought confusion to cryptocurrency service providers. Nischal Shetty, the founder of WazirX, a well-known cryptocurrency trading platform in India, said that it is difficult for him to understand what the government means by “private cryptocurrency”. “Bitcoin, Ethereum, etc. are public cryptocurrencies built on public blockchains and have their own specific use cases. They need to run smart contracts and write distributed ledgers built on them. People cannot use INR (India Rupee) or USDT to pay for Bitcoin or Ethereum blockchain fees.”
BTC plummeted in India’s local exchanges
Mainstream cryptocurrencies have generally fallen in the Indian market, with a drop of more than 20%. And there was a sharp drop. WazirX was down for a while, and the official Twitter notified the transaction delay problem of the application.
From the morning to the evening of November 24, Bitcoin (BTC) dropped from around 4.3 million Indian rupees (approximately USD 57,600) to 3.35 million Indian rupees (approximately USD 44,900) on WazirX. The biggest drop in the day was 22%. Ethereum (ETH) fell from a minimum of 320,000 Indian rupees (4290 US dollars) to 250,000 Indian rupees (3352 US dollars). The biggest drop was 21%. The US dollar stablecoin USDT also saw a sell-off, falling 20% from 75.9 Indian rupee (1 U.S. dollar) to as low as 60 Indian rupee (0.8 U.S. dollar).
The Indian market was not repaired until 8pm local time on November 24th. As of 4 a.m. on November 25, BTC recovered to around 4.248 million Indian rupees, which is about 56,000 US dollars. ETH rebounded to 315,000 Indian rupees, which is about US$4,223; USDT returned to around US$1.
At the same time, the global crypto asset trading platform Binance, BTC reached 57,200 US dollars. ETH is around 4257 USD. It can be seen that there is still a pricing gap between the mainstream crypto assets in the Indian market and the international market.
The Indian ban aims to pave the way for the central bank’s digital currency?
Judging from the wording of the new bill, Indian regulation has left some room for cryptocurrency, and greater intentions may clear market obstacles for the upcoming central bank’s digital currency.
Local media “India Today” quoted high-level government sources as saying that India may not be completely closed to concepts and technologies involving digital currency, nor will it take a hard line like China. At the same time, some officials emphasized the sovereign status of currencies while expressing concerns about cryptocurrencies.
Indian Prime Minister Modi mentioned Bitcoin in the “Sydney Dialogue” forum
The media reported that there are signs that the government is trying to adjust the situation by providing cryptocurrency-related safeguards. On November 18, Prime Minister Narendra Modi (Narendra Modi) said in a speech at the “Sydney Dialogue” forum, “Take cryptocurrency or Bitcoin as an example. It is important that all democracies share this. Work hard and make sure it doesn’t fall into the wrong hands and ruin our young people.”
Five days before that, Prime Minister Modi had a meeting with senior officials on cryptocurrency. A source told “India Today” that despite the volatility and risks, the popularity of cryptocurrency shows that it can become a source of government revenue. The benefits include direct taxes and goods and services taxes on services provided by cryptocurrency operators; It can also create jobs.
Since 2017, the Central Bank of India (RBI) has been expressing its serious concerns about cryptocurrencies. In July 2017, Ulijit Patel, then Governor of the Central Bank of India, stated that he was paying close attention to transactions involving cryptocurrencies. Since then, the Bank of India established an interdisciplinary committee to discuss the legality of cryptocurrencies.
On April 6, 2018, RBI issued a notice prohibiting banks and entities under its supervision from providing virtual currency-related services. But on March 4, 2021, the Supreme Court of India revoked the notice.
The definition of “private cryptocurrency” in the new bill in 2021 may have borrowed from the recommendations made by the SC Garg Committee established by the Economic Affairs Department of the Ministry of Finance of India in January this year. The committee even proposed a ban on cryptocurrency in its report entitled “Committee’s Report on Proposing Specific Actions Related to Virtual Currency,” and believed that “all these cryptocurrencies are created by non-sovereign parties.” In this sense, “They are completely private companies. These private cryptocurrencies have no potential intrinsic value, so they lack all the properties of currencies.”
Another important recommendation of the committee is that the government should maintain an open attitude towards official digital currencies. It proposes that the Ministry of Economic Affairs establish a group with representatives from financial regulatory agencies such as RBI to review and develop digital currency models suitable for India. . If the official digital currency is to obtain the status of legal tender, the committee has proposed that the central bank should create an appropriate regulatory agency for such digital currencies in accordance with the powers of the “Reserve Bank of India Act 22.”
Judging from the results, the committee’s recommendations seem to have been adopted, and India’s new bill on cryptocurrency and central bank digital currency will be discussed in Parliament on the 29th.
For local cryptocurrency service providers, a positive background is that on November 15th, the Standing Committee of Finance, led by Jayant Sinha, the former Minister of Finance of India, met with cryptocurrency exchanges and block exchanges. The representatives of the Chain and Crypto Assets Committee (BACC) and other representatives explained the rules and regulations and clear basic operating rules, although the members of the Financial Standing Committee expressed serious concerns about cryptocurrency and the need for supervision. But at this meeting, no one proposed a ban.