In less than two years, there has been a discernible shift in the Centre’s stance on cryptocurrencies – to potentially define these virtual currencies as financial assets and to stop short of a full ban on their circulation – based mostly on two specific triggers: the Supreme Court order of March 2020 that reversed the Reserve Bank of India’s move to cut the money supply to crypto exchanges, and the exponential increase in investment flows into crypto assets post the judgment.
The change in the government’s stand is evident from the title and scope of the new legislation – The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 – which is distinctly different from the earlier – Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 –recommended a couple of years back by an inter-ministerial committee comprising representatives from the Finance Ministry’s Department of Economics Affairs, Information Technology ministry, SEBI and the RBI, but ultimately ended up not being introduced by the government in Parliament.
While the older law sought to impose a complete ban on all crypto-related activities including mining, buying, holding, selling, and dealing, the new one, in contrast, will look to make a clear distinction when it comes to its oft used categorisation as a currency — with the definitional clarity expected to have a clear bearing on the regulatory aspect. In not treating these financial assets as currencies, indications are that the Centre is aiming to address some of the macroeconomic risks posed by cryptocurrencies that were repeatedly flagged by the central bank in recent weeks, both verbally and in writing.
On Tuesday, the government announced it would introduce the new Bill in Parliament during the upcoming winter session. It said the Bill has been listed to be taken up for introduction, consideration and passing during the session for the purpose of creating “a facilitative framework fo...