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Cryptocurrency Bill: Will it become asset class or face ban in India?

Cryptocurrency Bill: Will it become asset class or face ban in India?

The Union Cabinet will soon take up the cryptocurrency bill, which seeks to regulate virtual currency in India. Headed by the secretary(economic affairs), a high-level committee has been formed and it has already submitted its report on cryptocurrency.

Earlier, the central government had formed the panel to study the issues related to digital currencies and propose specific actions regarding the crypto coins. “Cabinet note is ready on cryptocurrency (bill). I am awaiting Cabinet to clear that,” finance minister Nirmala Sitharaman said on Monday.

The inter-ministerial panel on cryptocurrency under the Chairmanship of Secretary (Economic Affairs) to study the issues related to virtual currencies and propose specific actions has already submitted its report.

It has recommended that all private cryptocurrencies, except any virtual currencies issued by state, will be prohibited in India.

“Cabinet note is ready on cryptocurrency (Bill). I am awaiting Cabinet to clear that,” she said during her interaction with the media here.

Meanwhile, the RBI has concerns on the cryptocurrencies traded in the market and has conveyed the same to the government.

Back in May this year, the finance minister had said that a very calibrated position is supposed to be taken on crypto and digital currency as the world is rapidly transitioning towards technology. Other media reports suggested that bitcoin and other cryptocurrencies may be allowed as an asset class in India.

Underlining that both the government and the RBI are “committed to financial stability”, RBI Governor Shaktikanta Das had said there are no differences between the central bank and the Finance Ministry on the matter, and “we should now await the final decision on the matter” from the Centre.

Das had said he has “reasons to believe” that the government is in agreement with the “major concerns” flagged by the RBI about the cryptocurrencies.

The Supreme Court in March allowed banks and financial institutions from providing services related to cryptocurrencies by setting aside the RBI’s 2018 circular which had prohibited them.

Cryptocurrencies are digital or virtual currencies in which encryption techniques are used to regulate the generation of their units and verify the transfer of funds, operating independently of a central bank.

A three-judge bench, headed by Justice R F Nariman, said the Reserve Bank of India (RBI) circular is liable to be set aside on the ground of “proportionality”.

“Accordingly, the writ petitions are allowed and the circular dated April 6, 2018 is set aside,” said the bench, also comprising justices Aniruddha Bose and V Ramasubramanian.

 

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