Crypto The New Age “Tech Bullion”: Legislation on The Anvil & The Ever-Evolving Outlook

[2021] 133 taxmann.com 249 (Article)

On December 13, 2021, Lower House of the Parliament was apprised by the Hon’ble Minister of State for Finance that a Bill on Cryptocurrency & Regulation of Official Digital Currency is under finalization for consideration of the Union Cabinet. The bill is titled as, “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021″

As per the Government’s slated version, the Bill aims “To create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India (‘RBI’). 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 contemplated options include a complete ban on private cryptocurrencies, recognizing all or some categories of crypto products under a prescribed regulatory framework.

The proposed law on Crypto is likely to be line with the Financial Action Task Force (‘FATF’) Guidance. In October 2018, FATF had added two new definitions to the Glossary: Virtual Asset (‘VA’) and Virtual Asset Service Provider (‘VASP’). The said guidance was updated in October 2021, to assist both National Authorities as well as Private Sector entities in understanding & developing regulatory and supervisory responses to VA & VASPs and in understanding relatable Anti-Money Laundering and Countering the Financing of terrorism (‘AML/CFT’) Obligations.

According to the Hon’ble Union Finance Minister, the Centre had not received any proposal from the RBI (India’s Central Bank) to recognize Bitcoin as a currency in India. The Central Bank has recommended widening the definition of “Bank Notes” to include within its ambit Central Bank Digital Currency (‘CBDC’). CBDC is regarded as the digital form of country’s fiat currency, a virtual money backed and issued by Central Bank. As on date, India is not the only emerging economy which is evaluating a CBDC.

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