India likely to create official digital currency, ban Cryptocurrencies

The government is likely  to table a bill in the Budget Session of Parliament banning all private cryptocurrencies such as bitcoin in India and which will also deal with the creation of a legislative framework for an official digital currency. According to a legislative agenda listed by the government the law will "create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India (RBI)," said the agenda, published on the lower house website on Friday.

The legislation, listed for debate in the current parliamentary session, 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 agenda said.In mid-2019, an Indian government panel recommended banning all private cryptocurrencies, with a jail term of up to 10 years and heavy fines for anyone dealing in digital currencies.The panel has asked the government to consider the launch of an official government-backed digital currency in India, to function like bank notes, through the Reserve Bank of India.

The RBI had in April 2018 ordered financial institutions to break off all ties with individuals or businesses dealing in virtual currency such as bitcoin within three months. However, in March 2020, India's Supreme Court allowed banks to handle cryptocurrency transactions from exchanges and traders, overturning a central bank ban had that dealt the thriving industry a major blow.

Cryptocurrencies are also known as convertible virtual currency, which can be exchanged for fiat currencies. However, not all virtual currency can be exchanged for conventional money and so not all virtual currency is convertible. Bitcoin is the world’s most popular cryptocurrency, it has a convertible value, which has been witnessing record highs the past few months. It came into existence following the 2009 housing market crash. All bitcoin transactions are maintained in an open-source ledger that anyone can get access to. Bitcoins are convertible into US dollars.