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As Lok Sabha tables Crypto bill, experts divided on interpretation of ‘private cryptocurrency’

As the details of the Cryptocurrency Bill are not yet known it has been left open to many interpretations creating a stir in the crypto world.

Written by Mehab Qureshi | Pune |
Updated: November 24, 2021 6:29:19 pm
The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions. (File Photo/Reuters)

The cryptocurrency market crashed following the news of the government introducing the Cryptocurrency Bill, which seeks to prohibit all “private cryptos” in India, with certain exceptions to promote the underlying technology. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is set to be introduced in the Parliament in the upcoming winter session that starts on November 29.

“The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” the document reads. These are a class of cryptocurrencies that power private and anonymous blockchain transactions by obscuring their origin and destination. But exactly what constitutes ‘private’ is still unclear and adds to the confusion.

Some of the experts say that it means that all cryptocurrencies other than Central Bank Digital Currency (CBDC) will be banned, others say it means that cryptos that do not have a public ledger to track transactions will be banned.

For Sharat Chandra, a blockchain and emerging evangelist this is “an unpleasant deja vu”.

“Harping on the term “private cryptocurrencies” suggests that the policymakers are still grappling with the nuances of this transformative and rapidly evolving technology,” Chandra told indianexpress.com.

He believes that banning cryptocurrency completely to stop money laundering and terrorism is not the way to go.

“The government should license the entities who can engage in crypto-related activities, enforce AML, KYC regulations as per global FATF(Financial Action Task Force) guidelines and make them accountable to law enforcement and taxation authorities,” he said, adding that there are enough ways and means to allay fears of terrorism financing and anti-money laundering.

Different interpretations about the definition of ‘private cryptocurrencies’ have also orchestrated an environment of fear among retail crypto investors. Kazim Rizvi, founder of The Dialogue, a privacy policy think tank said that “prominent coins such as Bitcoin and Ethereum are public cryptocurrencies and do not come under the ambit of this statement.”

But investors are definitely spooked by the government’s announcements.

“Cryptocurrencies are trading at a 20 to 30 percent discount right now— due to the chaos created by the government,” Hitesh Malviya, founder, itsblockchain.com, a Blockchain cryptocurrency publication said.

According to Malviya, “Bitcoin, Ethereum, and other popular cryptocurrencies are not controlled or managed by any private entities— transactions are on the public ledger, and they are recognised as public cryptocurrencies by every major economy.”

But he pointed out that there are a good number of cryptocurrencies being promoted by private companies in the country right now. “Such crypto coins have been subjected to huge scams. If the government is looking to ban such privately owned cryptocurrencies then it’s a good move,” he said.

As of November 2021, there are more than 10,000 public and private cryptocurrencies in existence. “I am a strong proponent of governments putting regulations on cryptocurrencies. There are at least 20 to 30 cryptos with an understandable use case for their crypto offering, however, there are more than 10,000 cryptocurrencies,” Anirudh A Damani, managing partner at Artha Venture Fund said.

But while speculation over the bill will continue, experts are in agreement that investors shouldn’t give in to panic selling and wait for an informed decision only when the contents of the bill are made public.

Meanwhile, most cryptocurrency exchanges had a standard response hailing the move. While CoinDCX and WazirX called this a big moment for India, another cryptocurrency exchange BuyUcoin indicated it is optimistic about the crypto bill.

“We believe that there is a very strong case for a standard process for new cryptocurrencies before they get listed on any exchange in India for trading,” asserted Shivam Thakral, CEO of BuyUcoin.

Meanwhile, OKEx.com’s CEO Jay Hao urged the government to take a more nuanced approach. “With the positive outcome of the cryptocurrency bill, India will embark on an exciting journey of becoming the global leader in crypto, Defi, and NFTs,” he said in an official statement

Disclaimer: Cryptocurrency is an unregulated space and digital currencies are not backed by any sovereign authority. Investing in cryptocurrency comes with market risks. This article does not claim to provide any kind of financial advice for trading or buying cryptocurrency.

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