E-Paper
Explained: Govt committee recommends ban on all cryptocurrencies, except state-backed
In the Union Budget 2018-19, the government had announced that it does not consider cryptocurrencies legal tender and “will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system."
Union finance minister Nirmala Sitharaman on Tuesday said that a high-level committee has suggested that all private cryptocurrencies will be prohibited in India. This includes all virtual currencies except those issued by the State. This was a reiteration of the government’s earlier stance that cryptocurrencies are not considered legal tenders in the country.
The response came as a reply to a question in Rajya Sabha on whether the central government is planning to issue strict guidelines on cryptocurrency trading. Sitharaman said, "A high-level Inter-Ministerial Committee (IMC) constituted under the Chairmanship of Secretary (Economic Affairs) to study the issues related to virtual currencies and propose specific actions to be taken in the matter recommended in its report that all private cryptocurrencies, except any virtual currencies issued by state, will be prohibited in India."
What is a cryptocurrency?
A cryptocurrency is a virtual currency whose single unit is a complex digital code that cannot be duplicated. It is used as a digital asset designed to work as a medium of exchange.
What has been the government’s stand on cryptocurrency?
In 2018, the Reserve Bank of India (RBI) had banned banks from processing transactions relating to cryptocurrency. In the Union Budget 2018-19, the government had announced that it does not consider cryptocurrencies legal tender and “will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system." Earlier minister of state for finance, Anurag Singh Thakur had said that a bill on cryptocurrency is in the making and it will be sent to the cabinet soon. “Regulatory bodies like RBI and Sebi etc also don’t have a legal framework to directly regulate cryptocurrencies as they are neither currencies nor assets or securities or commodities issued by an identifiable user. The existing laws are inadequate to deal with the subject," Thakur said. Although, RBI has said that it has plans to bring a digital version of the Indian Rupee. The central bank said that it was exploring whether there was a need for a digital version of fiat currency or not and how to operationalise the digital currency in case of need.
Do countries have their own cryptocurriences?
Countries like Ecuador, China, Singapore, Venezuela, Tunisia and Senegal have issued their own cryptocurrencies. Iran has amended its cryptocurrency legislation to enable the country’s central bank to use virtual currencies to pay for imports. In Thailand, regulators have approved 13 legal crypto businesses to operate legally in the country. China will also issue 40 million yuan as part of the latest trials in digital currency this week, according to a report in Reuters.
