India: Cryptocurrency and Regulation of Official Digital Currency Bill 2021

India has signalled its intent to restrict the use of cryptocurrencies. 

Late on Tuesday 23 November, the Indian Government announced via a parliamentary bulletin listing of upcoming legislation that it would be seeking to implement the Cryptocurrency and Regulation of Official Digital Currency Bill 2021. 

The accompanying description of the bill makes it clear that the Indian government will only allow certain types of cryptocurrency. 

The government is intending to devise and introduce a framework for the official digital currency that will be issued by the Reserve Bank of India. The central bank, which has already voiced serious concerns about private cryptocurrencies, is expected to launch its own digital currency by the end of the year. 

This step by the Indian government will prove significant in determining the extent of cryptocurrency activity in the country. But it is not the first time that India has discussed restricting the use of crypto assets. Earlier this year, India’s government considered criminalising the possession, issuing, mining, trading and transfer of crypto assets. But no legislation was produced to achieve this.

The proposed legislation suggests that the Indian government has slightly changed its stance. It now appears to be focused on discouraging trading in cryptocurrencies that are not issued by its central bank. 

India’s actions come at the end of a year that has seen a number of countries adopting very different approaches to the issue of cryptocurrency. To name just two examples, September saw El Salvador became the first country to accept a cryptocurrency (bitcoin) as legal tender, while China’s central bank announced that all transactions involving cryptocurrency were illegal. 

There have been signs that most major economies have generally been wary of digital currencies. But we may, in the future, see such wariness diminishing. 

Looking a little closer to home, I think we can expect the UK government to take a fairly moderate approach. This could involve greater regulation of private cryptocurrencies but with more freedom being granted to some form of official digital asset. The Bank of England and the Treasury are, after all, set to begin a formal consultation in 2022 into the idea of a UK central bank digital currency.