The government of India intends to ban all private cryptocurrencies in the country, and the RBI considers the issue of an official digital crypto.
The recent move in India to ban all private cryptocurrencies through a bill has affected the crypto market as it is a country with many players in the crypto field. The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 is to be introduced by the government in the ongoing Parliament session, which creates unrest among crypto investors.
India’s Official digital Currency
A law to create a framework for a digital currency is scheduled in the Lok Sabha through the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. By introducing a new law to ban all cryptocurrencies, the government may introduce a digital currency soon.
Indian banks are now curbing trade in crypto assets, and customers feel the heat of this move from the bank. Top banks like Citibank, HDFC Bank, Axis Bank, and ICICI question their customers on crypto transactions.
The new law is to be framed on the Chinese regulations to bring in its own digital currency. China had brought the ban in 2017 on all cryptocurrencies and had asked all crypto exchanges to close down. The central bank digital currency is expected to roll out by 2022, in time for the Winter Olympics. The digital yuan is garnering more exposure as it undergoes trials in various cities.
Jan Dhan-Aadhaar-Mobile (JAM) Project
The JAM is a huge project taken to enroll citizens through the Aadhaar number. The Jan Dhan-Aadhaar-Mobile (JAM) project was introduced by the Modi government when he first became PM. Citizens now have an account with the government and are provided with an ID. Experts say that the government’s plan to issue a single digital currency is easily possible through the Aadhar.
BP Kanungo, the Deputy Governor of the Reserve Bank of India, says that there is an internal panel working on a digital currency model towards this by the central bank.
Ban on Cryptocurrency in India
Cryptocurrency transactions through foreign exchanges may also come under a ban under the new law, say officials from the Finance Ministry. Trading platforms in India wait anxiously for the government’s decision on the ban as it plays an important role in customer investment in digital assets in India.
There are already many players in the cryptocurrency market in India who hold more than $1 billion worth of crypto. The proposed ban will affect these cryptocurrency owners, and they request the government to reconsider their proposal. About 7 million Indians who have invested in the crypt have to be reimbursed, says WazirX CEO Nischal Shetty.
Investors are liquidating their holdings, as the new legislation may affect their investments in crypto tokens in India. Some are making use of self-custody wallets, or selling them, or transferring them. Experts say that a transition time will be provided to crypto owners in India before the ban comes into effect. Duration up to six months may be given to cryptocurrency investors before the new law comes into effect, say experts.
To avoid such problems the government is expected to bring regulations and not a complete ban on cryptocurrencies. More than 7 million of the Indian population have cryptocurrency assets, and their wealth cannot be erased through a ban.
In 2018, the Reserve Bank of India had barred banks and financial institutions from transacting in cryptocurrencies. The cryptocurrency market had blocked its implementation by a lawsuit in March 2020.
Corporate Investments lift Value of Major Cryptocurrencies
Tweets from Tesla owner Elon Musk about his investment in Bitcoin had brought a huge surge in the crypto. On 8th February, Tesla’s CEO had stated that he had bought around $1.5 billion worth of bitcoin. Further, Tesla’s announcement of accepting cryptocurrencies as payment has buoyed the value of cryptos. Dogecoin saw a sharp rise in value when Musk tweeted “Dogecoin to the Moooon”. Dogecoin is on a major bull run, and people are inclined to purchase it as it gains exposure from famous personalities, say experts. It is expected to hit $1 by the end of the year.
Big corporates like PayPal, Mastercard, and Visa have accepted the cryptocurrency, which has further lifted their value. .
Bitcoin has crossed the $50,000 mark for the first time, and trading volume had also increased. On Tuesday, Bitcoin moved higher than $50,000, rising to life highs. It has gained 74% year-on-year. On Thursday 11th February, it moved to $52,700, lifting the value of other cryptocurrencies as well. Bitcoin rose 58% in February. Cryptocurrency is a new asset class and has many financial institutions participating in Bitcoin. Retail investors are showing higher participation along with individual investment.
Ether is the second-largest cryptocurrency that rose to a record high on Thursday. The bitcoin rally has contributed to the rally in the Ether. On Thursday, it rose to $1,918. Ether went up 160% year-on-year, a record rally that has astonished investors. The news about the government’s intent to ban cryptocurrency brought a fall in prices by more than 30% within two days.