After months of speculation about the Indian government's stance on digital assets, the country will finally regulate Bitcoin and many other cryptocurrencies, but at the same time ban them as recognized domestic payment instruments.
According to a report by local publication NDTV, there will be no ban on cryptocurrencies. The new crypto law proposes to regulate digital assets as a separate asset class. "Crypto assets" as an asset class will fall under the jurisdiction of the Securities and Exchange Board of India (SEBI). Despite recognition as an asset class, the use of cryptocurrencies will continue to be closely monitored.
Not to be used as a means of payment
The bill states that cryptocurrencies will not be allowed for payments in the country, nor will they be recognized as legal tender. Individuals will have to declare their cryptocurrencies and transfer them to Indian crypto exchanges. They will not be allowed to hold their assets in private wallets or foreign crypto exchanges.
All those who violate the exchange regulations will be punished with a prison sentence of up to one and a half years. The regulator can also impose fines ranging from 5 million to 20 million rupees. To deter those who use assets for terrorist activities, the provisions of the Prevention of Money Laundering Act are applied with appropriate amendments.
CBDC as a digital means of payment
The Indian central bank, Reserve Bank of India, gave an update in July on the introduction of a digital currency, which is even expected to be launched by the end of 2021. Other sources talk about a pilot in the first quarter of 2023. The digital or electronic currency approved by the central bank will be a legal tender, unlike cryptocurrencies. The digital currency (CBDC) will be managed and overseen by the country's central bank.
Similar to China, the Indian government has imposed and lifted crypto bans several times in the past. The country is also following in the footsteps of the People's Republic of China in terms of CBDCs. Its digital yuan is the most advanced central bank digital currencies internationally and is in its second testing phase. For the 2022 Winter Olympics, the CBDC yuan should already be accessible to foreign visitors.
