Category: General|Nov 25, 2021 | Author: Admin

Prohibits private crypto

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The national banks look at independent cryptocurrencies with skepticism and face competition with official, regulated cryptocurrencies. China has taken the lead. Several countries are following suit. Last out is India.

The law will create a framework for India's official cryptocurrency
The description of a new "Official Digital Currency Bill" indicates that India intends to create an official cryptocurrency and allow general use of blockchain, but that they will ban private cryptocurrencies.


The news of the ban appeared in an overview of bills to be considered by India's parliament Lok Sabha when it resumes its winter meetings next week.


Exceptions for "technology" and "application"
The tenth bill in the overview is entitled "The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021".


Although the legislation itself has not yet been nailed down, the purpose of the bill is described: To create a framework for the official digital currency to be issued by the Reserve Bank of India. The bill also aims to ban all private cryptocurrencies in India; however, it allows certain exceptions to "promote the underlying technology behind" and "use" of cryptocurrency. The crucial point is what the law will put into "application".


Enormous potential in the CBDC
In July 2021, the management of India's Reserve Bank claimed that digital currency issued by the central banks - Central Bank Digital Currency (CBDC) - has enormous potential and that India can not afford to be left on the platform when the train leaves. The bill indicates that the argument has been approved by the Government of India.


The distinct meaning of "banning all private cryptocurrencies" has not been elaborated. As of today, so many Indians have invested in or dug crypto, that a direct ban will trigger a reaction. A ban on exchanging or paying with private cryptocurrencies has been proposed, and it harmonizes with the Indian authorities' attempts to expand their tax base.


Crypto "can be used for illegal purposes"
The country's crypto exchanges have campaigned loudly for the introduction of a regulatory system as opposed to a direct ban, which the government has previously threatened due to the fact that crypto "can be used for illegal purposes" (SIC!) And that alternative means of payment limit the central bank's ability to control inflation, the exchange rate, and the overall economy.


The description of the bill suggests that India will allow the use of blockchain - just not for private cryptocurrencies. The central bank sees no problems with the actual use of blockchain technology but is opposed to it being used as a financial instrument.


The definition becomes crucial

How the Indian government defines the "use" of cryptocurrency becomes crucial. In case they allow crypto to be treated as assets or a commodity, something parts of the government have argued for, it will open for trading on stock exchanges, but the authorities fear that it will make it possible to use crypto for safekeeping even if it officially will not be a medium of exchange.


The authorities fear that if they allow trade, people can use cryptocurrencies for partial payment when buying property, or for transfers abroad.


Several countries are considering national cryptocurrencies
India is one of several nations that have begun work on a CBDC: the United Kingdom, Japan, Canada, and Hong Kong have all begun work.


The United States has also begun work and yesterday took another step towards making crypto mainstream when the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency in a joint statement revealed that they are already working and that In 2022, they "plan to clarify whether certain activities related to cryptocurrencies carried out by banking organizations are legal".


They will also look at safety and soundness, consumer protection, and compliance with existing laws and regulations.


China leading
China has already issued its digital yuan and 140 million digital wallets have been used at least once. The Middle Kingdom has banned cryptography and has never allowed the use of private cryptos.

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