India has warmed up to the idea of cryptocurrencies faster than many countries. Over a hundred million investors are estimated to have joined the crypto club in India. Several research reports claim that India houses the largest number of crypto investors in the world. In the light of the increasing investments in cryptocurrencies, the government, for some time now, has been contemplating whether or not to regulate its mining and trade. Despite early rumours saying a complete ban on cryptocurrencies in India was being discussed, indications from official quarters, including the country's central bank, have largely been positive.
Discussions around the crypto sector sparked in India in 2018 after the Reserve Bank of India (RBI) imposed a ban on crypto transactions facilitated by other lenders. At the time, the RBI had said that the unregulated and untraceable nature of cryptocurrencies pose serious risks to the financial functioning of this country.
Later in 2021, the RBI lifted this ban backed by Supreme Court's judgment that did not favour a clampdown on crypto activities.
In order to let crypto activities carry on, the Finance Ministry was put on the task to formulate a bill listing ideas to regularise activities related to cryptocurrencies in the country. The process is being administered by Finance Minister Nirmala Sitharaman herself.
The year 2021 was expected to bring concrete laws regarding this digital finance sector, but the plans kept getting delayed and reached no conclusion. Here's a timeline on everything that has happened around India's much-awaited crypto bill that is expected to be tabled in the upcoming Budget Session of the Parliament.
September 2021: Dialogue around taxing crypto incomes among authorities
The crypto bill did not make it to the list of announcements in the Monsoon Session of Parliament last year because the work on it was not complete at the time. Later in September 2021, the finance ministry formed a new committee to analyse if the incomes generated from trading cryptocurrencies could be taxed as capital gains or would they need to be classified under a newly created tax category.
A period of four weeks was allotted to this panel to give its analysis to the finance ministry, details of which have remained undisclosed on public domains.
November 15, 2021: Government invites industry experts to discuss crypto market
Ahead of the Winter Session of the Parliament last year, the Parliamentary Standing Committee on Finance invited top crypto stakeholders for a meeting.
The agenda of this meeting, slated for November 15, 2021, was listed as “CryptoFinance: Opportunities and Challenges” and representatives from several crypto-based companies including CoinSwitch Kuber, CoinDCX, WazirX, and Crypto Assets Council (BACC) among others were asked to be part of it.
Details about what transpired during this meeting also remained discreet.
November 24, 2021: Crypto bill gets Listed on parliamentary agenda crashing price Charts
On November 24, the crypto market nosedived after India's potential plans of banning the sector emerged as an official agenda to be presented before the Parliament.
The bill proposed the prohibition of all “private cryptocurrencies” from operating in the country. At the time, no clarification as to which crypto assets were being classified as private was given. By definition, these were meant to be cryptocurrencies supported by private blockchains that allowed users to transact without making the data public. A report by CNBC had named Monero, Particl, Dash, and Zcash as examples of private cryptocurrencies. Popular crypto coins including Bitcoin and Ether were classified under public cryptocurrencies
The agenda also noted that the government wishes to bring an official digital currency for India. This development had taken place five days before the Winter Session of the Parliament was to commence on November 29.
November 30, 2021: Nirmala Sitharaman gives fresh update on crypto bill
Replying to a series of questions in the Rajya Sabha, the Union Minister for Finance Nirmala Sitharama said that the crypto bill would come into the house after the Cabinet clears it. Sitharaman also said the government has been cautioning people that cryptocurrencies was a "high risk" area.
Without revealing more details, the finance minister noted that the bill did not propose to legatimise Bitcoin as a legal tender in India like the central American country of El Salvador did in September 2021.
December 7, 2021: More details on crypto bill emerge
As per a Reuters report, the crypto bill suggested 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 be "cognisable", the bill summary reportedly reviewed by Reuters said. It essentially meant that violators could be arrested on a “non-bailable” charge.
December 23, 2021: Winter Session of Parliament ends with no word on crypto bill
Awaiting approval from the cabinet, the crypto bill did not make its way to the Parliamentary table last year at all. Citing sources, media reports at the time had said that the government is collecting information on how other nations are planning on regulating cryptocurrencies before taking a final call.
Crypto laws in India: Where things currently stand
On February 1, the finance minister will present the Union Budget for the year 2021-2022. The crypto bill may or may not make for an address-worthy topic.
The need to bring the crypto sector under governmental control stems from a number of reasons. Crypto transactions being untraceable and prone to be exploited for illicit activities like terror funding and the disruptive high energy requirements of crypto mining are some of them. This is why governments around the world are concerned about crypto regulations.
Time and again, Prime Minister Narendra Modi has also asked countries to have a uniform mindset to tackle crypto-related concerns.
Meanwhile, the sector is witnessing expansion and adoption in India. Not only cryptocurrencies, but other blockchain-based sectors like NFTs and the metaverse continue to garner interest among Indians.
Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.
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