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The Indian government is going to introduce the "The cryptocurrency and Regulation of Official Digital Currency Bill, 2021" in Parliament.
Until now, there isn't any regulation on the use of digital currencies in the country. But, recently, PM Narendra Modi had a meeting with senior officials regarding cryptocurrencies, and the news of a ban on the crypto started to arise.
Earlier this year, FM Nirmala Sitharaman had announced that there might be some regulations around the use of cryptocurrencies. Also, the prime Minister has previously warned the Indian youth to be careful about the usage of digital currencies. https://twitter.com/PMOIndia/status/1461180904643072003
These all incidences had aroused the speculations of the crypto ban in India among the population. As a result, people have started to withdraw their funds from cryptocurrencies. The domestic crypto market in India has faced a massive drop in prices since yesterday. But, Bitcoin is a global thing, and the global market isn't much affected yet, i.e., the global prices of cryptocurrencies haven't faced such a drop as in India.
The cryptocurrency and Regulation of Official Digital Currency Bill, 2021, seeks to ban all the private cryptocurrencies in the country. But, the bill will also promote blockchain technology and its use cases. It aims to create a facilitative framework to create a CBDC.
The bill clearly says that only private cryptocurrencies can be banned in the country and not public digital currencies. "The cryptocurrencies that do not have the public ledger to track the transactions are called the private cryptocurrencies”, according to the definition. Private cryptocurrencies include Monero, DASH, Zcash etc.
On the other hand, popular cryptocurrencies such as BTC and ETH are public cryptocurrencies because they have a public ledger to track the transactions. These cryptocurrencies are highly unlikely to get banned in the country.
Nischal Shetty, CEO of WazirX, has asked people to stop panicking and have faith in lawmakers of the country through his Twitter handle.
CoinDCX, a platform to access cryptocurrencies in India, has also shared its thoughts regarding the crypto ban and asked people to stay calm until there is clarification about the proposed crypto bill. https://twitter.com/CoinDCX/status/1463406459723517953.
Although, we still believe that the entire crypto ban is unlikely in India. But, let's understand what would happen if cryptocurrencies were banned in the country. In case the cryptocurrencies get banned, then the users will not be able to convert their fiat currency to buy the digital currencies. Also, the cryptos will not be converted to cash.
This potentially explains why Indian crypto users are withdrawing their funds from the market.
The bill hasn't arrived yet, and hence, it will be too early to jump to any conclusion. But, what we understood from the situation is that the Indian government doesn't want to accept Bitcoin as a payment method. In other words, they might consider banning the currency if it competes with Indian National Rupee.
But, being used as a mode of Payment isn’t the only use of digital currencies. In fact, In India, the use of Bitcoin (or any other cryptocurrency) as a payment method is almost negligible. Instead, it has more use cases such as gaming, staking and many more.
As we said earlier, that crypto ban is highly unlikely in India; instead, the government might create laws to regulate digital currencies. The crypto ban in India is mere speculation until the bill arrives, and hence, there isn't a need to panic.