Finance Minister Nirmala Sitharaman’s team is expected to brief her later this month around ongoing developments in the cryptocurrency space, amid a massive traction on crypto exchanges on sustained retail demand, another source said.
Both Sitharaman and Thakur have in recent months said publicly that the government would take a “calibrated” approach in regulating cryptocurrency rather than impose an outright ban.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was scheduled to be tabled in the Budget session of Parliament in March. However, it was deferred for reasons not made public.
It is widely expected that the proposed legislation will be tabled in the upcoming monsoon session. The draft bill is based on the Garg committee recommendations.
The Cryptocurrency Bill is still awaiting Cabinet approval and tabling in Parliament. Not much is known about the contents of the bill. This has been making many people nervous in the cryptoverse – the expanding universe of all crypto investors, players, dealers, enthusiasts, platforms and app developers.
“We have done a lot of work on it. We have taken stakeholders’ inputs. The Cabinet note is ready. We have to see when the Cabinet can take it up and consider it so that then we can move it," she said in her interview.
The bill was also listed for the Budget session of the Parliament — which takes place from February to March — but wasn’t tabled at the time, possibly because the session had to be cut short due to the second COVID-19 wave that hit the country at the time.
As for private digital currencies, recent comments by finance minister Nirmala Sitharaman indicate that rather than an absolute ban, there may be experimentation, exploration and encouragement of the emergent technology behind these.
Given the rapidly-evolving crypto developments, policymakers and regulators appear to have taken an opportunity to proactively embrace a promising technology. Global use cases are growing, as cryptos go mainstream with widespread applications. Applications of blockchain include its use in ‘regtech’ for regulators to capture and store data, in automated risk management, and for the facilitation of regulatory reporting as well as supervisory processes. Central banks around the world, from the European Central Bank to China’s and Turkey’s, are in the process of issuing CBDCs. This could be done in India, too. A recent Reserve Bank of India (RBI) report on currency and finance for 2020-21 rightfully recognizes the potential of CBDCs for financial inclusion and improving aggregate demand in emerging markets, as also for enhancing the speed of monetary policy transmission. RBI did indicate that a CBDC is a “mixed blessing", as it would risk disintermediation of the banking system.
RBI governor Shaktikanta Das’s recent statements must therefore be heeded, particularly on consumer protection and financial stability. A report of the Financial Action Task Force (FATF) underlined crypto anonymity and layering as intensifying the risks of money laundering, but the FATF also provides risk-based guidance to mitigate such risks through a combination of traditional and non-traditional methods, including customer identification, verification and transaction-monitoring prerequisites. We need a well-conceived regulatory framework that facilitates transparency, and the responsible democratization of market participants could guard against digital invasion and coercive behaviour. Pre-emptive regulation can monitor and prevent such undesirable outcomes