A report from the Economic Times suggests that the Indian government is looking for a complete ban on digital currencies. It is eyeing a legal framework that could be more effective when compared with an RBI circular.
Government’s intentions clear
ET quoted a senior government official as saying,
“A note has been moved (by the finance ministry) for inter-ministerial consultations. The spur for the draft cabinet note was the 4 March 2020 decision of the Supreme Court to quash the April 2018 circular from the RBI that prevented banks from providing services in support of cryptocurrencies.”
The newspaper suggests that a high-level government panel prepared a draft law in July 2019 that aims to ban all types of digital currencies in the country. It has also suggested 10 years of imprisonment and a 25 crore fine on those found dealing with them. In April 2018, the country’s central bank- Reserve Bank of India (RBI) issued a circular in which it asked all regulated banking entities to stop dealing with clients and companies with exposure to digital currencies. It had also issued several warnings regarding the same earlier.
However, in March this year, the Supreme Court of India canceled the circular. A bench of justices said that the circular by RBI could be set aside on the ground of proportionality. The court said that the government had not been able to take a call on cryptocurrencies, despite getting suggestions from several committees alongside proposals. It also included two draft bills with opposing stands on cryptocurrencies. Therefore, the court finds the measure by RBI disproportionate.
Government plans a stronger route
Now that the RBI circular is no longer able to stop crypto trading in India, the government is looking for a legislative way to ban digital currencies. The government and the RBI have both been hawkish on digital currencies and have issued several advisories to the public regarding the same. In 2017, the finance ministry set up a nine-member inter-disciplinary committee including representatives from the Niti Aayog to study the global outlook on digital currencies. In November of the same year, it said that the government does not recognize crypto as legal currency.