The Government of India has proposed to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the upcoming winter session from November 29th, 2021.
In 2018 the RBI had issued a circular imposing a blanket ban on cryptocurrency, prohibiting all the banks and financial institutions whether commercial or finance in nature to deal in digital currency or facilitating transactions for/on the same. The Internet and Association of India challenged the said circular before the Supreme Court alleging that the circular violated the principle of fairness and equality of opportunity.
In March, 2020 the Supreme Court gave a verdict in this case in the matter of Internet and Association of India vs. Reserve Bank of India, it lifted the blanket ban on cryptocurrency which was imposed by the RBI through its 2018 circular. It was a welcome decision for crypto traders in India.
Recently, on 31 May, 2021 the RBI through another circular reiterated the point held in the IMAI judgment and asked banks to not refer to RBI's 2018 circular anymore. This circular has again highlighted the current legal status of cryptocurrency in India i.e. unregulated.
The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 is aimed at banning all private digital currencies and impose a regulated way in which a cryptocurrency can be introduced officially. This will cause a lot of cryptocurrencies to follow the official pathway set by the act to become legal in India if the act is passed.
Moreover, the RBI has its own plans of introducing its own official cryptocurrency under Central Bank Digital Currency (CBDC) when the bill becomes and act. The bill provides a buffer period during which the populace would be allowed to liquidate all its private crypto holdings after which mining, issuing and trading in private crypto will be penalized by the provisions of the bill.
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