Indian Crypto Draft Bill Leaks as Proposals of Complete Ban Saddens Crypto Community


The much anticipated and prolonged draft bill for cryptocurrency in India got leaked in full. The bill proposes a complete blanket ban on the use of cryptocurrency in any form. This has really saddened the crypto community back in India who were expecting and hoping for a progressive call from the central government, especially after the country's finance minister and Prime Minister attended the G20 summit, where every participating country agreed upon implementing the FATF guidelines in their respective crypto regulatory framework.

First, a particular section of the bill was leaked which proposed the ban and a jail term of 10 years for those involved in crypto use. Then the compete draft bill got leaked.

Varun Sethi, the founder of Blockchain Lawyer, shared the complete leaked bill titled, “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019.” The speculation of a blanket ban has been rife even before the actual bill surfaced but at that time crypto enthusiasts neglected it due to the absence of any valid source.

The Enigma of Indian Crypto Regulatory Framework

The Indian crypto dilemma began in 2018 when the Reserve Bank Of India released a circular stating the ban of crypto use in the banking ecosystem. This circular was later misinterpreted as a blanket ban by several media houses. However, as a result of the banking ban, many crypto oriented businesses had to shut their operations as there was no way they could operate without the help of banks.

The banking ban was later challenged in the Supreme Court of India as unconstitutional, however, in the absence of any law for crypto use, the supreme court ordered the central government to draft the regulatory framework for cryptocurrencies. As a result finance ministry set up a drafting committee headed by Finance Secretary and Secretary of Economic Affairs Subhash Chandra Garg.

Mr. Garg was tasked with studying all aspects of cryptocurrencies and recommend regulatory frameworks for the country. Last month, he announced that the bill is ready and has been forwarded to the finance ministry for approval.

The Leaked Bill is Unofficial and RBI Denies Any Knowledge of It

Although the leaked bill gave nightmares to the crypto community in India, there are certain things that must be taken into consideration before jumping to a conclusion. First and foremost, the bill is leaked and has no backing of the central government or the RBI.

Advocate Mohammed Danish, co-founder of Crypto Kanoon, an Indian platform for blockchain and crypto regulatory news and analysis noted,

“This document cannot be claimed as the final recommendation of the expert committee to the Ministry of Finance. The document contains no mark of authentication on it nor it has come out from any official source.”

Another important point to note here is that one of the regulators listed on the bill has denied any involvement. The bill also mentions the name of the regulators involved in the drafting process called appropriate regulators, which include the likes of Insurance Regulatory and Development Authority of India, the Pension Fund Regulatory Development Authority, the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI),

“and any other appropriate regulator as may be notified by the central government.”

However, in an RTI (Right to Information) filled last month, RBI denied any knowledge of such bill. In addition, the central bank of India also mentioned that they have not pushed forward any such bill proposing a complete ban on crypto use, nor has any knowledge of any other gov department doing the same.

Seth also noted that the leaked bill looks quite premature and more of a very early draft. He stated,

“This looks like a very very rough draft of a proposed bill … [it might be] just a random discussion paper and it may not actually become [a] bill in the same manner and mode in which this has been stated.”

It's Draft Bill Not A Law

As soon as the alleged draft bill started to cause a sense of fear and disparity among Indian Crypto Community, the stakeholders came forward to assure people that it is a mere draft if true, and it would take some uphill task to make it a bill.

Nischal Shetty, CEO of local crypto exchange Wazirx, one of the only few exchanges active in the country immediately tweeted on the leaked bill saying, “This crypto bill has not been introduced in [the] current Parliament session,” he emphasized.

“This looks like a rough draft, plenty of changes to come.”

Nischal is one of the biggest advocates for positive crypto regulation and regularly tags the finance minister and the prime minister in his tweets to garner their attention towards the larger good that can be achieved through a positive regulation. He went to explain why the Indian Crypto community should not lose hope, he said,

“The Monsoon session of Parliament will not be discussing this bill, which means now we need to see if it gets discussed in the next parliament session which might be in December. Regardless, there are many bills pending to be discussed in Parliament so there’s a low likelihood of this bill being heard.”

He added further,

“If this is a real draft then it’s a very regressive approach to new technology. I’m certain our lawmakers will question and amend it such that the ban applies on money laundering and not on entrepreneurship or public participation.”

Submit Gupta, CEO of another local crypto exchange Coindcx rightly pointed out that India cannot go ahead with the current state of the drafted bill, given they were a part of the recently concluded G20 summit. The main focus of the G20 summit was all about crypto regulation where each participating nation agreed on following the FATF regulation guide.

He said,

“If this is a real draft then it’s a very regressive approach to new technology. I’m certain our lawmakers will question and amend it such that the ban applies on money laundering and not on entrepreneurship or public participation.”

Gupta also went onto say that if the central government go on formulate crypto law based on the current draft, it would be a catastrophic mistake on their part. He said,

“We will see blockchain startups moving out of the country, proficient blockchain developers moving abroad or working only on foreign projects. At a global level, the industry will keep on growing, innovation will keep on happening, and India will lose out its technological edge, just because the government is not ready to understand this technology well.”

A Few Surprising Aspects of the Bill

Seth, the blockchain lawyer pointed out a few positive from the leaked draft for cryptocurrency which defines it as

“any information or code or number or token not being part of any official digital currency, generated through cryptographic means or otherwise, providing a digital representation of value which is exchange with or without consideration, with the promise or representation of having inherent value in any business activity which may involve risk of loss or an expectation of profits or income, or functions as a store of value or a unit of account and includes its use in any financial transaction or investment, but not limited to, investment schemes.”

Sethi explained that the definition of crypto in the bill is quite different from any other country, as it notes any piece of encrypted information falls under that category. Apart from the definition, the bill allows the use of crypto for research purposes.

Professor A. Damodaran of the Indian Institute of Management in Bangalore called the leaked draft bill as narrow scoped. He said that the bill is aimed at strengthening the Payment and Settlement Act of 2007. He explained,

“The good news is that the bill does not prevent crypto tokens from being used as a development instrument to help India’s unbanked population, most of whom are poverty-ridden.”

Conclusion

The first and foremost thing to take away from the alleged leaked crypto draft bill is that there is no official backing. Secondly, it's a bill and would need to be discussed in the parliament before made into a law. Given that India participated in the G20 summit and agreed to follow the guidelines of FATF, it would be a big mistake if they do otherwise.

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