update 18 August 2021

Indian Government Restricts All Cryptos And Explores Digital Currencies

In the 2021 budget, the government seeks to ban all private cryptocurrencies during the parliament budget session. According to a bulletin of the lower house of parliament, they will also put the structure for the digital currency issued by the Reserve Bank of India, allowing specific exceptions to promote blockchain, the underlying cryptocurrency technology it uses.

The central bank is looking into the need for a digital version of the fiat currency and implementing it. The new bill has been titled ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’.

In an RBI booklet on payment systems, the government is also deliberating on forming a digital version of the Indian Rupee. 

Investors Remain Nervous

Many crypto experts were uneasy with the news. Nischal Shetty, the founder of Wazir X, said in a tweet late Friday that there’s no such thing as a ‘private cryptocurrency.’ Cryptos, by their very nature, are decentralized and public.

Industry watchers said that the government’s depiction of ‘private’ could imply that any digital currency that is not sovereign could be viewed as a ‘private’ currency, including Bitcoin. Globally, the surge in Bitcoin and its usage lately has been driven by increasing interest from institutional investors and platforms like PayPal and Square.

Famous investor Ray Dalio cautioned investors that it would be foolish to assume that governments will stand by and let cryptocurrencies gain prominence over their fiat money. Dalio wrote in his note that rather than it being far-fetched that the government would overrun the prevent the use of Bitcoin (and its competitors), it seems that the more successful it is, the more likely these possibilities would be.

Private Digital Currencies

The government is yet to release ‘The Cryptocurrency and Regulation of Official Digital Currency Bill. Clarity will emerge on the nature of and the extent to which the government will regulate other cryptocurrencies in India, only when it is made public.

The central bank booklet noted that it had gained fame in recent years. The regulators and governments have been doubtful concerning these currencies and are apprehensive about the associated risks. Nevertheless, RBI is exploring the possibility of acquiring a digital version of fiat currency and, in case there is, how to operationalize it.

In 2018 the Supreme Court overturned a previous ban on banks’ use for cryptocurrencies’ payments. 

Development Finance Institution

The government will also launch The National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021, to introduce a new Development Finance Institution. 

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This DFI will act as a catalyst for infrastructure financing and as the principal financial institution and development bank to build and sustain an uplifting ecosystem across the country’s life-cycle of infrastructure projects.