The government’s cryptocurrency Bill would ban the use of cryptocurrencies as a method of payment in India and seeks to make those who violate the law subject to arrest without a warrant and being held without bail, according to a report by Reuters.
Individuals or corporations violating the rules set by the government on cryptocurrency may face a penalty of up to Rs 20 crore and a jail term of 1.5 years. The government had tabled the Bill during the winter session of Parliament.
Though cryptocurrency will not be recognized as legal tender, all private cryptocurrencies will be regulated and not banned, as was planned earlier. The name of the Bill has also been replaced ‘crypto asset’ from ‘cryptocurrency’.
According to the summary of the Bill, the government is planning a ‘general prohibition on all activities by any individual on mining, generating, holding, selling, (or) dealing’ in digital currencies as a ‘medium of exchange, store of value and a unit of account’. Flouting any of these rules would also be ‘cognizable’ which means an arrest without a warrant is possible, and ‘non-bailable,’ it said.
Although the government has previously said it aims to promote blockchain technology, the proposed law will also deal a blow to its use as well as to the non-fungible token market in India, according to some lawyers. “If no payments are allowed at all and an exception is not made for transaction fee then it will also effectively stop blockchain development and NFT,” said Anirudh Rastogi, founder of law firm Ikigai Law.
The Centre’s plans to crack down heavily on cryptocurrency trading sparked a frenzy in the market and several investors were excited with significant losses. Lured by a barrage of advertisements and rising prices for cryptocurrencies, the number of investors in crypto assets has surged in India.
While no official data is available, industry estimates suggest there are about 15-20 million crypto investors in the country, with total crypto holdings of roughly Rs 450 billion. The government now plans to also come down heavily on advertisements that seek to woo new investors, according to the draft summary of the Bill.
Self-custodial wallets that allow people to store digital currencies outside exchanges are also likely to be banned, the source said.
The tough new regulations stem from the central bank’s grave concerns about digital currencies and aim to put in safeguards to ring-fence the traditional financial sector from cryptocurrencies, the draft summary of the Bill said.
The Securities and Exchange Board of India (Sebi) will be the regulator for crypto assets, the draft summary also said.
The Reserve Bank of India’s virtual currency has not been clubbed with this Bill and the central bank will regulate any issues related to digital currencies. The Bill also empowers the government to exempt certain activities in the public interest.