The central government proposes to establish a “facilitative framework for distributed ledger technology” as part of the proposed cryptocurrency regulation bill that is slated to be taken up for the approval by the cabinet shortly, perhaps as early as next week.
The Bill proposes to prohibit certain aspects of crypto asset usage such as “currency substitutes or as payment systems or for remittances”, according to official sources in the know of the matter.
The Bill also proposes a “general prohibition on all activities by any individual on mining, generating holding, selling, dealing in issue, transfer, disposal of or use of cryptocurrency as a medium of exchange, store of value and a unit of account”.
Crucially, the Bill proposes that since the “underlying technology of crypto assets is still evolving and has many uses”, any person using technology underlying can crypto-assets for any lawful activity will be exempted from the proposed restrictions. The technology or process underlying any cryptocurrency for purpose of experiments and research however, cannot be used for making or receiving any payments.
The Bill also seeks to “minimise financial stability risks by suitably ring fencing the formal financial sector from crypto assets”.
These and other clauses are part of the proposed framework to regulate the evolving space of crypto currencies, the sources added,
Among the other salient features of the proposed bill is a framework for the creation of the official digital currency (digital rupee) to be issued by the Reserve Bank of India.
The Bill proposes penalties for contravention of provisions by individuals as well as corporate bodies, with the offences being cognisable and non-bailable.
The crypto assets shall be regulated as a commodity by the Securities and Exchange Board of India (SEBI).
The sources added that the size of crypto assets in India is estimated at around Rs 45,000 crore, with about 15 million investors. The regulation is being crafted keeping in mind consumer and investor protection and to prevent tax evasion and money laundering.
“The challenge posed by the crypto ecosystem includes operational and financial integrity risks of crypto assets, and inadequate disclosure for some stable coins”, the draft adds.
The Bill also proposes a framework to prohibit advertisements and the spread of misinformation to the public in line with the global approach in this regard.
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