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Exclusive | Why govt has not listed Cryptocurrency Bill for Monsoon Session of Parliament

Moneycontrol was informed by officials that other economic issues require legislation at the Monsoon Sessions of Parliament. Although a ban on cryptocurrency is unlikely, it is possible that they could be used as a tradable asset like art or commodities.

Contrary to popular expectations, the government did not include the eagerly awaited Cryptocurrency Act in the Monsoon Session, which begins on July 19.

Officials declined comment on whether the bill would be presented later in the Winter Session or beyond this year.

Moneycontrol learned from multiple sources that there were two reasons why the bill was not filed now.

Additional deliberations are needed

While a draft bill has been approved, further discussions are ongoing between the Finance Ministry and Reserve Bank of India (RBI), as well as other stakeholders. The government is keen to make a thoughtful decision about cryptocurrency. Although there won’t be an outright ban on cryptocurrency, legal tender will not be allowed. According to sources, cryptocurrency will be considered a tradeable asset with a market and ‘like commodities or arts’.
Second, and most important, the government believes that regulation of cryptocurrency is not high on its economic agenda. The policymakers believe that although there are significant investments in cryptocurrency, and that the market will continue to grow, it has very little impact on the real economy.

“One can only push through so many bills or amendments in a session. This includes those pending from the Budget Session.

Moneycontrol was informed by a top government official that the cryptocurrency market has not yet had a significant impact on the real economic system.

It is unlikely that Ban would be implemented, but it wouldn’t be a currency.

Two other government officials were privy to the deliberations and said that the Centre wants to have a balanced, holistic view of cryptocurrencies before it introduces a bill to Parliament.

One official said that a draft bill was ready but further discussions are ongoing. While the RBI wants an outright ban, it is clear that some parts of the government believe that it can be permitted as an asset class that can be traded and where a person can invest. All this is subject to regulations. The government is concerned about the “relative volatility” of cryptocurrency.

The consensus opinion seems to be that cryptocurrency will not be accepted as legal tender or money. A currency is one that has sovereign backing. The official stated that money is money because it derives value from a sovereign fiat.

If the authorities decide not to consider Bitcoin, Etherium, and other legal currencies legal currency, then an exchange of cryptocurrency for goods or services will be viewed as a barter transaction between two parties, rather than as a transaction that has the legal backing that a sovereign coin provides.

1.5 million Indians have made investments in cryptocurrency

According to data from cryptocurrency exchanges, approximately 1.5 crore Indians have made investments in cryptocurrencies. These holdings are worth Rs 15,000 crore. More people are starting to invest. There are 350 companies that operate in the crypto and blockchain space.

The Supreme Court overturned a 2018 rule prohibiting crypto trading by banks in March 2020. This resulted in an increase in trading and an increase of exchanges. The RBI maintained, however, that it had “major concerns about” the asset class. The RBI has given an informal directive to banks to cease handling crypto trades, and investors are said be to be approaching the apex court.

Other economic bills have precedence

The Narendra Modi government has other legislative priorities for now. The Factoring Regulation Amendment Bill and the Insolvency and Bankruptcy Code Amendment Bill (IBC) are some of the expected economic bills and amendments. Also, the Coal Bearing Areas Acquisition and Development Amendment Bill and the law governing chartered accountants and company secretary amendments will be presented.

Additionally, amendments will be made to the Pension Fund Regulatory and Development Authority Act (PFRDA Act) and the Deposit Insurance and Credit Guarantee Corporation Amendment Bill (DICGC) plus the Electricity Amendment Bill.

The Factoring Amendment Bill was introduced in September 2020. However, it was referred to Standing Committee on Finance for further review. This bill was introduced in order to monitor “factoring”, which is transactions where a business entity transfers its receivables to a customer to allow for the realisation of funds.

To assist companies affected by COVID-19, the amendments to IBC were introduced. It will provide a semi-formal, faster, more cost-effective and less disruptive framework for insolvency resolution.

To reform and accelerate the disciplinary process of institutes such as ICAI, ICSI, and others, the Chartered Accountants, Cost and Works Accountants and Company Secretaries Amendment Bill (Amendment), is being introduced.

To fulfill an earlier budget announcement, amendments to the PFRDA Act will be made to separate the National Pension System and the PFRDA and provide universal pension coverage. In the event of a bank’s suspension, the DICGC (Amendment Bill) will allow depositors to have easy and time-bound access.

To ensure more competition, transparency, and private sector participation in the power and coal sectors, laws are being amended