Central Government set to introduce Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 - (23 Nov 2021)

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The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is to be presented in winter session of Parliament. The Bill seeks to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. Further, the Bill also seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses. A pro-active step is necessary to regulate digital currency.

A cryptocurrency is defined as a digital or virtual currency (VCs) secured by cryptography, a technique for secure communication. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. Blockchains are managed by a peer-to-peer network. VCs are not backed by Government fiat. These are also not legal tender. Hence, VCs are not currencies. These are also being described as ‘Coins’. There is however no physical attribute to these coins. Therefore, Virtual ‘Currencies’ are neither currencies nor coins. The Government or Reserve Bank of India has not authorised any VCs as a medium of exchange. Further, the Government or any other regulator in India has not given license to any agency for working as exchange or any other kind of intermediary for any VC.

There has been a phenomenal increase in recent times in the price of VCs including Bitcoin, in India and globally. The price of Bitcoin and other VCs therefore is entirely a matter of mere speculation resulting in spurt and volatility in their prices. Unregulated crypto-currency technique might give rise to illegal or subversive activities such as money laundering, smuggling, drug trafficking and terror financing. In the year 2019, Inter-Ministerial Committee in its report recommended banning of the cryptocurrencies in India and imposing fines and penalties for carrying on of any activities connected with cryptocurrencies in India. With regard to private cryptocurrencies, given the risks associated with them and volatility in their prices. The legal status of cryptocurrencies varies substantially from country to country and is still undefined.

Tags : CRYPTOCURRENCY REGULATION BILL