Is Cryptocurrency Getting Banned In India? Here's What Investors Should Know And Do

It¡¯s been barely a day since the Central government tabled the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the Lok Sabha¡¯s winter session, which is slated to begin on November 29. But this news has spread like wildfire amongst the estimated 15-20 million crypto investors in India, who possess a total crypto holding of around Rs 40,000 crore ($5.39 billion).

And thanks to the fear of what would happen if the bill gets passed, many investors have resorted to panic selling, which has pulled down the price of various cryptocurrencies.

While it's natural to feel the jitters in such scenarios if you are a crypto investor, it¡¯s not okay to blindly believe the gossip. So if you are wondering how the possible consequences of this bill will impact you and what road lies ahead, just pause and read on, instead of taking any impulsive decision and resorting to panic selling.

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What¡¯s the purpose of this bill?

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 seeks to prohibit all private cryptocurrencies in India, barring a few to promote the underlying technology of cryptocurrency and its uses, the primary aim behind this expected ban is to essentially seek to "create a facilitative framework¡± for the creation of the official digital currency to be issued by the RBI, which has since long been in favour of a ban on cryptocurrency, having raised red flags surrounding the potential use of crypto for illegal purposes, besides the lack of regulations on crypto resulting in limiting RBI¡¯s ability to manage inflation,foreign exchange and overall economy.

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What if the bill gets passed? Will cryptocurrency be banned?

Firstly, remember that in case the government bans or puts restrictions on crypto currency, it will not be the first country to do so, with nations like China, Nepal and Russia having already banned and/or restricted the use of cryptocurrencies. Currently there is only one country that has given the cryptocurrency bitcoin the status of legal tender in September 2021, is El Salvador.

Now, coming back to the possibility of the bill getting passed and a potential ban on crypto. If the bill gets passed in its current form, all private cryptocurrency, barring a few, would be banned.

In the event of crypto getting banned, it is likely to imply that the transactions between the bank and your crypto exchanges will be prohibited. Neither will you be able to convert local currency to buy any kind of cryptocurrency nor be able to liquidate or encash existing crypto investment. The crypto held by you in such cases will be stuck until the ban gets uplifted, or some relief measures like a window period for liquidation might be offered. However, all this remains to be seen.

What are the possible consequences of this proposed ban? What should crypto investors do?

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What will happen to all the crypto currency that is in circulation already? This is the million dollar question that everyone¡¯s asking right now. Despite tabling the bill in parliament for upcoming winter session, the government has remained tight-lipped regarding the minute details of the bill, and has not made any disclosures to the public as well. In such scenarios, it remains to be seen whether the government gives a window period for crypto investors to liquidate their assets, any subsequent penalty, if any, to be levied on failure to abide by the resolutions and window period, etc.

At present, a shadow of fear and uncertainty looms large over India¡¯s crypto ecosystem. So, it¡¯s probably better for crypto investors to be a part of the wait and watch game instead of going for panic selling and incurring losses. Just remain patient and see how the government plans to roll out this bill, and whether it opts for a maximum blanket ban or goes ahead with putting some restrictions and regulating the existing crypto market.

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