It would be illegal to own, sell, issue, mine, and use cryptocurrencies, according to the draft bill. It contemplates fines of INR 25 million (equivalent to USD 325,000) or imprisonment for up to 10 years.
India is seeking to introduce a law to ban cryptocurrencies, as the government considers a legal framework to be more effective than a Reserve Bank of India (RBI) circular on the matter. A government official explained that the finance ministry produced a draft bill that has been circulating, for inter-ministerial consultation.
The incentive for the cabinet’s proposal was the March 4th decision of the Supreme Court to annul the April 2018 RBI circular, which prevented banks from providing services in support of cryptocurrencies, according to the aforementioned official.
After some consultations, the draft bill will reach the cabinet and, later, the Parliament. Experts say that, if it follows the same lines as the previous proposal, the law will come as a shock to investors, exchanges, and other entities that deal with cryptocurrencies like Bitcoin.
In July 2019, a high-level government group prepared a draft bill that banned all forms of private cryptocurrencies. It suggested a fine of up to 25 million rupees (INR) (equivalent to USD 325,000) and imprisonment for up to 10 years for those who traded with them.
At the time, the court said that it recognized the RBI’s authority to take preventive action but was testing the proportionality of such a move. To determine it, the RBI needed to show some type of damage suffered by its regulated entities but there was none.
The verdict overturned a ban on trading in Bitcoin and other cryptocurrencies. Furthermore, it has caused startups to resume investment plans and the expansion of cryptocurrency trading in India.
However, industry experts note that the situation has not been easy. Several banks have banned payments for the trade of cryptocurrencies in India or abroad since there has been no specific statement from the RBI after the Supreme Court’s decision. Even so, transactions continue to occur through other channels.
One of the experts stated that the draft bill of the July 2019 proposal was very strong. Such proposed legislation would make it illegal to own, sell, issue, transfer, mine, or use cryptocurrencies. Furthermore, Amit Maheshwari, partner at AKM Global, explained that its approval in its current form would eliminate the cryptocurrency industry in India.
The executive expected the government to consult with shareholders and not continue with the current draft bill.
The panel, led by Former Finance Secretary Subhash Garg, had defended the ban on all types of private cryptocurrencies in their report. However, he asked the RBI and the government to study the introduction of an official cryptocurrency.
The draft bill that the committee prepared said that any direct or indirect use of a cryptocurrency would lead to a fine or a prison sentence, for not less than one year and extendable for up to 10 years.
According to the draft bill, recidivism will be subject to imprisonment for up to five years, extendable for up to 10 years, with a fine. The fine could be three times the loss or damage caused by the person, three times the profit that he or she has made, or up to INR 25 million.
By Alexander Salazar