Investors Resort To Panic Selling After Govt Tables Bill To Ban 'Private' Cryptocurrency. Here's What Has Happened

Just a day after the central government listed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 for introduction in the Lok Sabha¡¯s winter session, which begins on November 29 and ends on December 23, cryptocurrency prices crashed, with investors panicking and scrambling to exit fearing what would happen if the bill gets passed in the current form.

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While the bill 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. The RBI has been in favour of a ban on cryptocurrency since long and has flagged its concern that crypto can be used for illegal purposes, apart from limiting the central bank¡¯s ability to manage inflation,foreign exchange and overall economy.

Before this bill was tabled, the Standing Committee on Finance, chaired by BJP member Jayant Sinha had last week met the representatives of crypto exchanges, blockchain and Crypto Assets Council (BACC), among others, to arrive at a conclusion that cryptocurrencies should not be banned, but it should be regulated. However, there was no clarity or conclusion from industry associations and stakeholders on who should be the regulator or what will happen to the cryptocurrency which is already in circulation.

The crypto crash after the bill was tabled yesterday gives a strong indication of the immense popularity that cryptocurrency has gained, with industry estimates suggesting 15 million to 20 million crypto investors in India, with total crypto holdings of around Rs 40,000 crore ($5.39 billion).

If this proposed bill goes through and crypto gets banned, India will not be the first country to do so, with nations like China, Nepal and Russia, to name a few, have already banned and/or restricted the use of cryptocurrencies. However, the only country that gave the cryptocurrency bitcoin the status of legal tender in September 2021, is El Salvador.

Also Read: Does It Make Sense To Cash Your Investments When The Market Crashes?

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