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No plan to recognise Bitcoin, Sitharaman tells Parliament
The government is not considering any proposal to recognise Bitcoin as a currency in India, finance minister Nirmala Sitharaman told Parliament on Monday
The government is not considering any proposal to recognise Bitcoin as a currency in India, finance minister Nirmala Sitharaman told Parliament on Monday.
In a written reply to a specific question – whether the government has any proposal to recognise Bitcoin as a currency in the country – Sitharaman said: “No, sir.” The query on Bitcoin was jointly raised in the Lok Sabha by two members of Parliament.
The government plans to introduce a bill in the Parliament’s ongoing winter session to ban all private cryptocurrencies, or virtual currencies (VCs). Bitcoin is one of the popular private cryptocurrencies.
Replying to another question on a similar matter in the House, minister of state for finance Pankaj Chaudhary on Monday said the Reserve Bank of India (RBI), in October, proposed including digital currency in the definition of a bank note, something that will require an amendment to the RBI Act, 1934.
“Cryptocurrencies are unregulated in India,” he added. Private VCs do not carry any sovereign guarantee and offer anonymity, unlike a fiat currency.
The government has scheduled the introduction of the “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021” in the Winter Session of Parliament with the purpose to “prohibit all private cryptocurrencies in India”, but the bill will have “certain exceptions to promote the underlying technology of cryptocurrency and its uses”, according to a bulletin issued by the Lok Sabha last week.
The government, however, intends to move ahead with a plan to authorise RBI to float its own digital currency. Technically known as a central bank digital currency (CBDC), these are distinct from cryptocurrencies in the manner that they are regulated by a centralised authority – the central bank.
On another specific query – whether the government is aware that Bitcoin transaction is silently blooming in India in the recent years – Sitharaman said: “The government does not collect data on Bitcoin transactions.”
The currency is not banned and the government has initiated the process of enacting a law to regulate VCs.
There’s also a school of thought that believes the government could continue to allow cryptocurrencies as an asset class (like mutual funds), not currency.
“It has been stated position of the government that it does not consider private cryptocurrencies as legal tender, and it will take all measures to eliminate use of these assets as a payment system, which can often be used in financing illegitimate activities,” an official aware of the development said, requesting anonymity.
Earlier in 2018, the central bank cautioned both people and its regulated entities such as scheduled commercial banks against the risks associated with cryptocurrencies such as Bitcoin, and advised banks not to deal with such currencies. The Supreme Court, however, set aside the RBI circular on March 4, 2020.
Earlier this month, RBI governor Shaktikanta Das sounded an alarm on cryptocurrencies, cautioning investors on the potential pitfalls of the digital currencies. The central bank says private VCs pose serious threats to the macroeconomic and financial stability of the country, and also doubted the number of investors trading on them as well as their claimed market value.
