Budget 2021: Govt likely to introduce a bill to ban cryptocurrency

The government is to introduce a bill to ban, with exceptions, the trading in cryptocurrencies in India and also put in place the framework for an official digital currency to be issued by the Reserve Bank of India.

The move is likely to end ambiguity on cryptocurrency which is neither banned nor legalised in India. The RBI had banned banks from dealing with crypto exchanges but that embargo was overturned in March 2020 by the Supreme Court of India.

The Regulation of Official Digital Currency Bill, 2021 is likely to be introduced in the Budget Session of the Parliament, a Lok Sabha bulletin has said.

"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.

The bill, if passed, will prohibit the use of cryptocurrency as legal tender and currency. Additionally, cryptocurrency will be kept out of the payments system.

The Centre is likely to name RBI as the regulator and Enforcement Directorate as the investigating authority for offences under the cryptocurrency bill.

Earlier, an RBI booklet on payment systems, released on January 25, stated that the central bank is exploring whether to issue a digital version of the rupee. "Private digital currencies (PDCs)/virtual currencies (VCs)/cryptocurrencies (CCs) have gained popularity in recent years. In India, the regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks," said the booklet titled 'Payment and Settlement Systems in India'.

"Nevertheless, the RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it," it added.

The SC ruling that overturned the RBI ban allowed crypto exchanges to restart operations in the country and dip into the booming crypto trading business in the world. Players like WazirX, Unocoin and Zebpay have recorded a massive jump in trading volumes.