- The Union government has introduced “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021” for the winter session of the parliament.
- While making crypto legal tender is “off the card” given the fact issuing currency is among the major functions of the government in the modern democratic setup, no one is denying the power of underlying blockchain technology.
- A blockchain collects information together in groups, also known as blocks that hold sets of information.
The Union government has introduced “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021” for the winter session of the parliament. Since the legislative agenda was released on the Lok Sabha website on November 23, most of the discussion in the media has surrounded the Cryptocurrency bill (25 more bills are listed in the agenda), given the hotness of the topic and raining crypto unicorns in the last few months.
So far, the content of the bill is yet to be revealed but the consensus in the policy circles is that private cryptocurrency will be banned just like China, and the government will introduce a public cryptocurrency to ensure that the underlying technology of blockchain can be used for the welfare of the citizens of the country.
Speaking to CNBC-TV18 before the winter session of the parliament, finance secretary TV Somanathan said, “One thing I can say very clearly is that crypto will not be legal tender by any means. Gold is not a legal tender, silver is not a legal tender and alcohol is also not a legal tender, beyond that I will not be in a position to say anything more.”
While making crypto legal tender is “off the card” given the fact issuing currency is among the major functions of the government in the modern democratic setup, no one is denying the power of underlying blockchain technology. Even the description of the bill on the Lok Sabha website makes the same argument. “To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India.
The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” it says.
Previously, in the first major use case of blockchain technology in India, the CBSE decided to use it to keep the class 10th and 12th results safe and tamper-proof. For the uninitiated, Blockchain is a method of data storage that is being used increasingly to develop cryptocurrency, shared digital goods like exam results, and so on.
A blockchain collects information together in groups, also known as blocks that hold sets of information. Blocks have certain storage capacities and, when filled, are chained onto the previously filled block, forming a chain of data known as the “blockchain.”
The Communist government of China launched the first official digital currency of the world, which it sees as an alternative to the US dollar, amid the Coronavirus pandemic last year in June, and a few months after, trading of all private currencies like Bitcoin was blocked.
The Indian government would also come up with its version of the cryptocurrency very soon. The facilitative framework for the use of digital currency (e-Rupee) has already been created and the central bank of the country may soon launch its cryptocurrency also.
“Inflows of cryptocurrencies from KYC-ed investors through approved Indian and global exchanges can potentially be allowed into India for the purposes of enhancing SME access to low-cost global capital,” wrote iSPIRT, the technology think-tank that has been behind revolutionary applications like UPI, in a blog post published a few months ago.
The Indian focus is on utilizing blockchain technology on the lines of IndiaStack, by creating and an open and interoperable reference base called IndiaChain. According to NITI Aayog, IndiaChain could be used for land Records, supply chain Management, Identity management, benefit distribution, educational certificates, power distribution, cross-border finance, etc. India has long faced a problem with the availability of data that could be used for efficient delivery of public goods, keeping records of income of the people, the property they own, etc.
So, there is no blanket ban on blockchain technology or cryptocurrency, but it was obvious from day one that it is not going to be a legal tender and the government will not relinquish one of its primary functions (issuing currency) to the hands of rogue techies.