It seems like Indian government is planning on banning cryptocurrencies and here are some of the reasons which explains the situation.
Cryptocurrency watchers in India, who have been voicing concerns about India's total ban on digital tokens for months, should be reassured as the central government is poised to put forward a bill at the parliamentary session next winter that, if passed, would only include "private" cryptocurrencies to be banned. The former come first - investors trading Bitcoin, Ethereum and Co. can breathe a sigh of relief because it is a blockchain-based public cryptocurrency business that offers a certain level of anonymity, but is definitely different from what is considered a private Cryptocurrency that Monero, Dash and others of this type know about.
“Public” versus “private” cryptocurrencies
Although the definition of a “private” cryptocurrency has not been clarified by the central government, it is very likely that Bitcoin, Ethereum, and other crypto tokens of this type will not be banned because they are based on a public blockchain network, which means much more than this. Network Transactions carried out can be tracked and at the same time a certain level of anonymity is guaranteed for users.
Private cryptocurrencies, on the other hand, can refer to Monero, Dash, and the like - which, although based on a public blockchain, obfuscate transaction information to provide privacy to users. while Bitcoin offers anonymity, Monero offers privacy and is therefore a private token.
Is a total ban possible?
Because cryptocurrencies have low value or liquidity, it can be difficult to completely ban tokens – which can be labelled as assets, commodities, currencies, or even securities. In theory, millions of people around the world could own such a currency - which is essentially a piece of code that cannot be "banned" - and still agree to use it as a value-creating medium of exchange. Transferring cryptocurrency from one wallet to another is fundamentally no different from sharing files from one computer to another, so an official ban should not deprive people of the ability to send cryptocurrency to one another.
However, there is always an opportunity for governments to create barriers to transactions and access to these digital tokens. With the majority of investors trading on crypto exchanges, banning this platform will likely eliminate most cryptocurrency users who may not have entered the technical world of crypto wallet creation and so on. A total ban will force the cryptocurrency business to cease its operations in India. One of the world's largest cryptocurrency exchanges, Huobi, had to do the same when China imposed a complete ban on cryptocurrencies in early September. The exchange's founder told the Financial Times on Nov. 8 that its sales to Chinese consumers would be zero for the quarter from September to December.
A policy expert familiar with government developments told sister publication HT Livemint that there are “two factions” in the government – one that wants to ban cryptocurrencies and one that wants to regulate it. "But because the regulatory scenario is not clear, the first group came out first," the man was quoted as saying. “If you want, the government can issue a cash bill that will be paid within 14 days. Or they could issue regulations faster.” Meanwhile, Nishal Sheti, CEO of WazirX - India's largest cryptocurrency exchange platform - tweeted: “The laws governing cryptocurrencies are on the list for the winter session. Not much has changed in the description. There will be speculation on both sides. The good thing is that more and more people in government know how crypto works.
The center is expected to propose a bill to the winter session of Parliament to ban all cryptocurrencies in India with a few exceptions and create a framework for regulating digital currencies issued by the Reserve Bank of India (RBI). In response, all major cryptocurrencies were down about 15% or more, with Bitcoin price down around 18.53%, Ethereum price down 15.58%, and Tether down 18.29%.
The cryptocurrency market remains in the red
According to data from cryptocurrency exchange WazirX, the digital currency market currently remains in the red - as all the big ones like Bitcoin, Ethereum, Solana and Binance are in decline. While Ethereum was down 0.86% to $4,167, Solana was also down 1.24% to $4,167. However, the so-called "Memecoins" - DOGE and SHIB - have increased in value, if not by much; their growth was set by crypto exchanges at 0.30% and 1.64% respectively.
Possible reasons for the decline in cryptocurrency
According to John Yadeluka, founder of multi-strategy fund Banz Capital, there is a movement of bitcoin out of very old wallets that has sparked rumors and fear among investors which has led to a possible drop in the market price. "Observers are trying to understand what the movement of Bitcoin from old wallets means and whether this indicates a big sale of Bitcoin from these wallets in the near future," Yadeluka was quoted by Forbes as saying.
Here are the 10-points to be noted in this situation:
- The Bill on Cryptocurrencies and Official Digital Currency Regulations, 2021, will be introduced at the Lok Sabha during the winter session which will start on November 29.
- The bill aims to “create a facilitation framework for the creation of an official digital currency issued by the RBI. It also tries to ban all private cryptocurrencies in India but allows some exceptions to promote basic cryptocurrency technology and its use.
- The Reserve Bank has expressed "serious concern" about private cryptocurrencies. Bitcoin, the world's largest cryptocurrency, is around $60,000 and its price has more than doubled since the start of this year, attracting hordes of local investors.
- The industry estimates that there are between 15 million and 20 million crypto investors in India with total crypto holdings of around 40,000 kroner ($5.39 billion).
- Recently, there has been a growing number of advertisements promising easy and high returns on investments in cryptocurrencies, amid concerns that the currency is allegedly being used to lure investors with misleading claims.
- Last week, the Standing Finance Committee, chaired by BJP member Jayant Sinha, met with representatives from cryptocurrencies, blockchain and the Crypto Asset Council (BACC), among others, and came to the conclusion that cryptocurrencies should not be banned, but should be regulated.
- Private digital currencies have grown in popularity over the last decade. However, regulators and governments are skeptical of these currencies and fear the risks involved.
- On March 4, 2021, the Supreme Court revoked the RBI circular dated April 6, 2018, which prohibited banks and companies it regulated from offering services related to virtual currencies.
- In a keynote address during the dialogue in Sydney on November 18, Prime Minister Narendra Modi called on all parties to ensure that cryptocurrencies do not fall into the wrong hands.
- El Salvador is currently the only country that recognizes cryptocurrencies as legal tender.
In a similar development, the Indian government will propose a law banning private cryptocurrencies and a framework for an official digital currency to be issued by the Reserve Bank of India (RBI) during the winter session of parliament starting November 29.
India, which has seen a high level of interest in investing in cryptocurrencies as well as many investors who are already investing, continues to warn citizens against investing their money in cryptocurrencies and cite the high financial risks. Previously, the International Monetary Fund (IMF) has also mentioned that crypto assets are very risky and must be monitored closely because they have the potential to disrupt various aspects of the global financial system.