No Plans To Boost Cryptocurrency Sector In India: Govt To Lok Sabha

The government in a written reply to the Lok Sabha, said that it has no plans to boost the cryptocurrency sector in India. This statement also reiterates a previous government stance that it does not collect data on the cryptocurrency sector. It remains unclear as to what "boosting" the cryptocurrency sector means.

The government has already made it clear that it plans to regulate the unregulated cryptocurrency and blockchain industry in India.

While cryptocurrencies or trading in them are not illegal in India, the fast-growing and increasingly visible sector is currently operating in a regulatory grey area.

The reply was given by the Minister of State for Finance, Pankaj Chaudhary to Jagdambika Pal, a Member of Parliament from Uttar Pradesh.

Previously the government has said that it has no data on the number of cryptocurrency traders in India, or data on the number of coins - like bitcoin - traded. It also told Parliament last week that it had no plans to make cryptocurrencies like bitcoin a currency.

Also Read: No Proposal To Recognise Bitcoin As A Currency: Govt To Lok Sabha

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was mentioned as part the government's legislative agenda during the ongoing Winter Session of Parliament. Officially, the government wants to ban "private" cryptocurrencies, and regulate an official CBDC (central bank digital currency) of the Reserve Bank of India. The same agenda was introduced in the Budget Session this year too, but it was not introduced. However, a media outlet has stated that the government may choose to regulate cryptocurrencies in India rather than imposing a strict ban on them, citing a Cabinet note.

Except the official statement of bill on the legislative agenda, it remains unclear what the modalities of the impending cryptocurrency bill will be.

Find the reply here.

CBDC

Another reply given to Parliament outlined the benefits of CBDCs and said that the government has received a proposal from the RBI in October 2021 to amend the definition of a 'bank note' to include its digital version. Central banks like the RBI are studying the concept of CBDCs, which aim to utilise the same technology powering cryptocurrencies - blockchain - to create digital currencies of their own. Unlike the decentralised bitcoin, dogecoin or ethereum, these will be backed by a central authority and will avoid fluctuation, by pegging it in value to the official currency of the country.

On the benefits of a CBDC, the government says that the introduction of the CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs and reduced settlement risk. Seigniorage is the interest and profit a central bank earns from producing more money.

Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option, the reply says. However, it also highlights that there are also associated risks which need to be carefully evaluated against the potential benefits.

This reply was given by Chaudhary to Rakesh Singh, the Member of Parliament from Jabalpur, Madhya Pradesh.

It can be read here.

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